That this House has considered the future of low-carbon off-gas grid home and business heating.
It is a pleasure to serve under your chairmanship, Sir Christopher. I thank the Backbench Business Committee for facilitating today’s debate, which I hope will give hon. Members the opportunity to discuss the options available to the owners of rural homes and businesses that are not connected to the gas grid to decarbonise their properties. I hope to hear from my right hon. Friend the Minister how that might be done, always bearing in mind the principles of choice and fairness.
One of the clear outcomes that emerged from the Climate Assembly that was commissioned by Select Committees of this House was that the path to net zero must be fair to people who live in different parts of the UK. Hon. Members will be aware of the need to phase out boilers using fossil fuels in all homes to meet the net zero challenge, and it is the Government’s aim to ban replacement natural gas boiler installations from 2035. Most homes are connected to the natural gas grid, and the debate continues as to whether those homes may eventually be powered by hydrogen or whether they will have to resort to electric heat pumps, but little attention has been paid to rural homes and businesses that are not connected to the gas grid. The primary solution proposed by the Government appears to be electric heat pumps, which are very costly and disruptive to install, or biomass boilers, which come with air pollution concerns.
Over 4 million people live and work in our rural communities. Many rural homes and business properties, such as hotels and pubs, tend to be old and draughty; 47% of such homes were built prior to 1949. According to figures from the Office for National Statistics, only 3% of off-gas grid homes achieve an energy performance certificate rating of band C, and many rural homes need significant energy efficiency investment if they are to be suitable for electrified heating: for example, they may require replacement hot water tanks and additional radiators, and some homes will need to be rewired or have external wall insulation to accommodate heat pumps. Electricity grids in rural areas will also need to have their resilience improved and built up as heating and transport become increasingly electrified in future.
It is therefore surprising that the Government apparently intend to pursue a “rural first” approach to the roll-out of heat pumps, committing to ban the installation of replacement fossil fuel boilers in rural homes from 2026 and in larger businesses from 2024. By contrast, they aim to start phasing out replacement installations in on-grid homes from as late as 2035. Given the extra cost and disruption of installing heat pumps compared with existing boilers, rural homeowners will quite reasonably wonder whether this is fair. Under the proposals in the heat and buildings strategy, homeowners off the gas grid will not be permitted to replace an existing fossil fuel system with a new one after 2026. For rural businesses, changes will start even earlier: in 2024—only two years away—for larger business premises over 1,000 square metres, and from 2026 for many rural small and medium-sized enterprises, including those in the hospitality and agricultural sectors. I hope that in his reply, the Minister will explain why rural homes and businesses will be required to switch from fossil fuel so much earlier than their on-grid counterparts.
We should remember that nearly 2 million rural off-gas grid properties will be impacted by these proposals very soon. Most rural off-gas grid homes are heated by oil, which historically has been the cheapest fuel, although hon. Members will be aware of the current price spike. There are hundreds of suppliers of heating oil across the country, enabling consumers to shop around for the best price. There are also liquefied petroleum gas suppliers for those who wish to use gas for home heating and cooking, with some homes using electric panels as well as solid fuels such as peat and coal, but oil is the most commonly used fuel for heating. It will be a significant undertaking to replace oil-fired systems in the normal boiler cycle unless affordable alternatives are available to those who use them. Indeed, I wonder whether the Government have seriously underestimated the scale of the challenge that they have set themselves.
According to the heat and buildings strategy, the current cost of a heat pump for the average off-gas grid home is £12,000. A further £2,000 may be required to fit cavity wall insulation, loft insulation and draught proofing to upgrade a home so that it is heat-pump ready. Rural household incomes are, on average, smaller than urban ones. Although some rural householders will receive limited Government support in the form of the boiler upgrade scheme and the home upgrade grant, many will not be able to afford the cost of heat pumps and the associated energy-efficient retrofit work that is required for them to work efficiently. Put simply, the cost of installing a heat pump could be out of reach for many, and the associated disruption will be extremely inconvenient.
There is a significant policy gap in the heat and buildings strategy in relation to the so-called “able-to-pay” households, which may not qualify for any Government assistance. Many such households may lack the savings and income to pay for a heat pump. The Government are considering using the mortgage market to improve the EPC scores of such homes, and requiring homeowners to make changes at the point of sale of their property or, alternatively, to increase their mortgages to cover the cost of installing a heat pump. However, it would be deeply unfair to saddle homeowners with more debt as interest rates rise, as indeed they have done today.
Some able-to-pay households may receive a £5,000 grant, via the boiler upgrade scheme, towards their air-source heat pumps or biomass boiler installation. However, a maximum of just 90,000 households will be helped under that scheme, which applies to both on and off-grid properties. That simply does not cover the boiler replacement cycle in off-grid homes. There is no support for energy efficiency improvements in able-to-pay households, and it is not clear how they will afford the transition—especially if they are required to change their boiler at short notice—or accommodate the significant disruption and time taken for a heat pump to be installed. Notably, the strategy contains very little detail on the Government’s position on the cost-effectiveness of the measures they propose.
A study by Gemserv found that 44% of rural off-gas grid homes that currently use heating oil can be considered hard to treat when the cost of transition is taken into account, and heat pumps are not the cheapest low-carbon heating option for them. The Federation of Master Builders suggests in its national retrofit strategy that hard-to-treat homes should be last to be retrofitted rather than first, to allow the energy efficiency industry to drive down costs and increase its skill base to meet the challenge.
The Government also appear to assume that the cost of heat pumps relative to traditional boilers will halve by 2025 and reach cost parity by 2030. That is ambitious. The heat-pump market is already at a mature stage of development—many thousands are manufactured each year—so it is hard to see where those cost reductions will come from. Delta-EE, the independent analyst and Government adviser, recently published a paper stating that even in an ambitious scenario, reductions of only 34% could be achieved by 2030. That means that rural homeowners will be required to pay a significant premium to decarbonise their heating unless extra support and a more affordable range of choices are provided.
What do rural homeowners themselves think of the proposed measures? According to the Calor rural attitudes tracker, they are not very happy with them: 59% think that it is unfair that off-gas grid homes will see their traditional boilers phased out earlier than those connected to the gas grid; 69% do not think that it will give them enough time; and 83% cited cost, and 64% cited technical constraints, as the main barriers.
Last year, the Prime Minister wrote in The Sun, “Boiler Police are not going to kick your door in & seize your trusty combi”. That is a reassurance and it may well be true, but it appears that the only option available for off-grid households after 2026 will be a heat pump. I would suggest that a greater range of affordable, low-carbon heating options will be required if rural homes are to decarbonise fairly and affordably, so how can the Government make the transition fairer for rural off-grid consumers?
First, they should reconsider the 2026 deadline and bring the deadline in line with their plans to phase out all fossil fuel boilers by 2035. The Government should adopt a “heat-pump ready first”—not a “rural first”—approach. All homes from post 1970, both on and off grid, should be targeted first, not just the more challenging, off-grid homes. That will help the Government’s ambition of 600,000 annual heat pump installations by 2028 to be achieved and will reduce the risk of negative installation experiences for rural householders.
Secondly, the Government should provide a choice, not a mandate, on the heating system that may be used. Heat pumps should be installed because householders want them, rather than because they are forced to have them. The Government should also give greater support to other technologies, such as hybrid heat pumps. These run alongside traditional boilers, which, in times of high heat demand, will allow more difficult-to-heat rural homes to use the traditional boiler element to keep those homes warm. The Government should also incentivise the development of alternative renewable fuels, including bioliquids and biogases such as BioLPG and HVO—hydrotreated vegetable oil. BioLPG is already on the market, but its uptake is hindered by a lack of policy support and by the fact that it is not currently recognised in building standards. These fuels, if adopted, would allow existing central heating systems to reduce their emissions significantly and could see hard-to-treat homes decarbonised more affordably.
I hope that the Government will pause for thought as to how they treat rural homes and businesses in the transition to lower-carbon heating. It is essential that the principle of fairness should be upheld. The Government should give rural homeowners and businesses access to a full range of options to decarbonise their homes and premises. The extent of the challenge is great indeed—too great to rely on heat pumps alone.
It is a pleasure to serve under your chairmanship, Sir Christopher. I begin by congratulating the right hon. Member for Clwyd West (Mr Jones) on bringing this very important and timely debate before the House this afternoon. I will underline and support most if not all of the remarks that he made. He made a very powerful case in favour of the Government pausing, taking a step back and reconsidering their approach to decarbonisation of heating fuel for rural households, for the following reasons. On average, rural households tend to have been built a lot longer ago, so the energy efficiency is somewhat lower. Also, something that we need to bear in mind—we do not do that enough, in my opinion—is the discrepancy between average rural incomes and those of our urban counterparts, which the right hon. Member made very clear in his speech.
I am very grateful for this opportunity to speak not only about the impact that the transition will have on households, but about the impact on businesses. In recent times, when we have understandably been focusing a lot on the cost of heating for domestic households, the impact that rising prices are having on businesses has often been missed, and many of my constituents have raised it as a real concern for them. I would like to elaborate in a moment on their case studies.
I fully support the right hon. Member’s calls for the Government to pause and reconsider their approach. I was particularly struck by his argument about needing a just and fair transition as we decarbonise the economy. I fully agree that we need to decarbonise our society and economy, but it has to be done in a just and fair way. Otherwise, it is not realistic and will, at worst, place a substantial cost on the shoulders of those who can least afford it. I very much endorse his remarks.
This debate is timely. Rising prices have caused a great deal of concern and worry for households and businesses across the country. Following April’s energy price cap increase, the Welsh Government estimated that some 45% of households in Wales could fall into real fuel poverty. Although the energy price cap offers some solace to those lucky enough to be included in it, it is not applicable to off-grid homes and businesses. They have been exposed and are vulnerable to sky-high prices that are increasing at a rapid pace. This is especially true in rural areas such as Ceredigion. According to the mid Wales energy strategy proposed by the Growing Mid Wales partnership, as many as 72% of properties in Ceredigion are off the mains gas grid.
It is a pleasure to serve under your chairmanship, Sir Christopher. I congratulate my right hon. Friend the Member for Clwyd West (Mr Jones) on securing what is an incredibly important debate for many of my constituents, a huge proportion of whom are off-grid. For the sake of total transparency, my house is among those in my constituency that are off-grid.
I will pick up on the points made by the hon. Member for Ceredigion (Ben Lake), focusing my comments on drop-in fuels and the options that are available for off-grid homes, other than heat pumps. As has been mentioned, installing an electric heat pump in some of the country’s oldest rural homes can indeed cost the £12,000 figure that we have had quoted, plus £2,000. However, I have also seen estimates for some particularly unique houses—those built out of forms of cob or, in my constituency, wychert—where the cost of installing a heat pump with all the necessary additional retrofit installations can be as high as £30,000. Of course, those heat pumps only work efficiently if—it is a huge “if”—the house in question has the highest standards of modern insulation. Many older houses do not, and indeed cob, wychert and thatched properties cannot be insulated because of the way they were built—the walls simply cannot be allowed to become wet or damp; otherwise, the materials will come apart.
At a time when the cost of living is rising sharply, it is critical that consumers and businesses across our United Kingdom have a range of technologies at their disposal, so that they are not obliged—this is about choice, as my right hon. Friend the Member for Clwyd said in his opening speech—to pick an option that may not be suitable for their property or that, as the hon. Member for Ceredigion mentioned, would be unaffordable. There are clearly many options out there in the marketplace—some are available today, and some are clearly still in development but are close to being scalable to the point of production and wide-scale consumer use.
Thank you for calling me to speak, Sir Christopher. I thank everyone who has spoken, particularly the right hon. Member for Clwyd West (Mr Jones), who opened today’s debate and has given us all an opportunity to participate and add our comments.
Like the hon. Member for Buckingham (Greg Smith), I live in the countryside—I have been fortunate to do so all my life. The options for me and for my neighbours are very limited, when it comes to gas grid homes. Also, many people now use their homes for their businesses as well. We have a high number of small and medium-sized businesses and self-employed people. Many people work at home, perhaps working with other directors in the firm, so there is a real issue for the rural community to perhaps try to do things better.
I have been fortunate to take part in many debates on the greener environment, but it is great to be here to discuss how it will work in the workplace and at home. We must all take personal responsibility for it. It is certainly something I would love to know more about, so this debate is an opportunity to listen to other regional opinions. We will hear shortly the Scottish opinion, which I very much look forward to. Most of all, I look forward to the Minister’s response, because he is the gentleman with the answers. Hopefully we will all benefit from that.
I declare an interest as chair of the all-party parliamentary group for healthy homes and buildings. For us in the APPG, there is more focus than ever on having efficient heating in our homes and looking at how that can be done. At the same time as looking at efficiency, we need to address the issue of a low-carbon commitment. Those are the twin tracks of the debate, and I hope the Minister will respond on them.
We have set a legally binding target to achieve net zero greenhouse gas emissions by 2050, and the sixth carbon budget is another indication of our shared dedication to a green industrial revolution. While we are certainly on the current path in terms of sustainability, some issues have been brought to my attention by the organisation Calor, and I would like to briefly address some of them. Others have mentioned liquified gas. There are options that need to be considered, and I believe that that is one of them.
It is a pleasure to serve under your chairmanship, Sir Christopher.
I, too, congratulate the right hon. Member for Clwyd West (Mr Jones) on securing this debate in Westminster Hall today, because he has brought forward yet another aspect—something that needed to be highlighted—about a growing crisis for people living in off-gas grid areas regarding the need to adjust for the future. Having said that, there are other issues for them right now, which are causing them great difficulty; I will reflect on that in a moment or two.
The right hon. Gentleman talked about the need to address rapidly some of the issues in the heat and buildings strategy, with rural businesses having to act by 2024 and hospitality businesses by 2026. There are really tight timescales for those involved, given the circumstances that we face just now. He also rightly talked about the cost of insulation being out of reach for many homes and businesses.
UK Government support is inadequate; the right hon. Gentleman referred to a maximum of 90,000 households being eligible and there is no support for energy efficiency within that. He is absolutely right to call for far greater ambition in that regard. Low-carbon heating and buildings can help significantly in tackling both the climate crisis and the spiralling costs for families, but first they actually need to exist.
The hon. Member for Ceredigion (Ben Lake) talked about the rural properties occupied by families who are really struggling just now, with 45% of households in Wales in fuel poverty, which is a shocking figure to have to think about at the moment. The worst thing about that figure, which is replicated in other rural communities across the nations of the UK, is that it will get worse. That is just the fact of life that we face at the moment. It is also why the UK Government need to take more action, both to address the long-term issues and to help people in the short term.
This has been a good debate about a very troubled subject. I congratulate the right hon. Member for Clwyd West (Mr Jones) on securing the debate and putting forward comprehensively just what trouble we are in as far as off-grid properties and decarbonisation are concerned. We heard very thoughtful contributions from the hon. Members for Ceredigion (Ben Lake), for Buckingham (Greg Smith) and for Strangford (Jim Shannon); the latter is something of a fixture in these debates but always has something relevant and useful to say, whatever the subject. We also heard a thoughtful contribution from the hon. Member for Inverness, Nairn, Badenoch and Strathspey (Drew Hendry), who was supposed to be summing up the thoughtful contributions of everyone else, but made one himself.
This is a really thorny subject, because the imperative of decarbonisation heavily hits off-grid housing and businesses. There are, as hon. Members have mentioned, a surprisingly high number of properties in England, Wales and Scotland that are off-grid. I think it is about 1.1 million houses in England, 230,000 in Wales and 550,000 in Scotland. Put together, that is a very large number of homes. Not only do they often have different characteristics from the mass of on-grid housing in urban areas, but they also have limited choices for decarbonisation.
I only have the figures for the split of fuel for properties in England, but we can see straightaway that people are at present heating their homes with arrangements that are as heavily carbonised as they could be: 78% in England are heating with oil, 13% with LPG—slightly less polluting, but still pretty high-carbon—and 9% still with coal. It is imperative that we get all those properties off high-carbon heating arrangements and on to low-carbon heating arrangements as soon as possible.
Far more off-grid homes are poorly insulated and of a lower standard assessment procedure rating than their urban comparators. They are generally larger and more free-standing than properties in urban areas. Therefore, in the solutions we put forward to decarbonise them, we must take account of those issues, particularly so that we can get the energy efficiency quality of those homes up to the standard where they can take those low-carbon arrangements.
I congratulate my right hon. Friend the Member for Clwyd West (Mr Jones) on securing this important debate. I reassure him that decarbonising heat remains a key priority. We recognise that this is a deeply worrying time for most of our constituents, for whom the impact of rising energy bills is perhaps the biggest concern. That applies as much to rural communities as to any other.
I commend my right hon. Friend for his long-standing work as one of the key voices for north Wales ever since we were both first elected in 2005. At the time, he was the first Conservative Member to be elected in north Wales in about eight years, and he has consistently stuck up for his constituents ever since.
We are taking action on bills. The Chancellor recently announced a £15 billion package—as part of an overall £37 billion this year—to help families who are struggling with their bills. However, as we set out in our recent British energy security strategy, which was launched by the Prime Minister and the Secretary of State in April, if we are to keep prices down for ordinary households and businesses for the long term, we need to rely on affordable, clean and, above all, secure sources of energy.
Off-gas-grid households and businesses already understand those challenges as well as anyone. Many of them rely on traditional forms of energy such as oil for their heating needs, so they have been particularly exposed to the impact of rising global energy costs. Of course, compared with other buildings, properties off the gas grid are some of the biggest emitters, so transitioning those properties to low-carbon heat is a key Government priority. That will not only put us on track for our different obligations, but it will help to move us off imported oil, build our energy independence and help to protect consumers from high and volatile energy prices.
As Members from all four nations of the United Kingdom have recognised during the debate—showing that we are better together when it comes to approaching these matters—the problem is not necessarily confined to the remoter parts of England, Scotland, Wales and Northern Ireland. We heard from my hon. Friend the Member for Buckingham (Greg Smith), and I know that parts of Kent and other counties that might be regarded more traditionally as the home counties also have large numbers of off-gas-grid properties.
The Minister is saying that if there is an issue with off-gas grid households, it should be brought to the CMA. Does he support the basic ask to get Ofgem involved in regulating off-gas grid areas? A very simple solution would be for Ofgem to take action directly.
We have to think about the nature of that market, which I am satisfied the CMA has the ability to regulate. Although it involves an energy product, that does not mean that Ofgem, rather than the CMA, is best positioned to provide the oversight to prevent anti-competitive practices. There is a lot of Government support for off-grid properties, as there is for on-grid ones, including the £400 payment and the £150 council tax discount in England, with Barnett consequentials for Wales, Scotland and Northern Ireland.
The Minister has jogged my memory. Some farmers have told me they have commercial electricity contracts to service their homes, and are therefore worried that they may not receive the £400 payment. I know the Government are looking at the technical details, so perhaps he could take that point back and ensure that it is addressed.
Of course, energy prices for businesses attract a lot of very keen Government attention. The hon. Gentleman is right to suggest that there was a consultation on the workings of the scheme, which has closed; the Government will respond shortly. Energy costs for businesses is an area of active Government interest. We provide a lot of support for energy-intensive industries, and want to ensure that overall we have a sustainable position, whereby businesses are able to afford energy bills in order to continue the vital work that they do for us across the rest of the economy.
Many of the additional Government support measures, including the warm home discount, the winter fuel payment and the cold weather payment, are also available for those off the gas grid. Energy efficiency measures are a major area of Government investment, with £6.6 billion to be provided over the course of this Parliament. I have already mentioned the boiler upgrade scheme, which costs £450 million, and the home upgrade grant, which amounts to £1.1 billion.
As somebody who used to work in a swimming pool, I was intrigued by what the hon. Member for Ceredigion described as the difficulties facing the swimming pool in his constituency. The great news is that one of the Chancellor’s key announcements this year was the reduction of VAT on solar panels. I am sure Plaid Cymru was very supportive of the Chancellor’s overall package of measures, which will bring particular benefit to the swimming pool in the hon. Member’s constituency.
The use of hydrogen is an interesting question. Decisions will be made in the coming years on where we think hydrogen can be used as a source of heat. We will have to think about our hydrogen production capacity, and the alternative pressing needs for hydrogen, such as decarbonising industry and major forms of transportation, including maritime, heavy goods vehicles and aviation. There are a lot of potential uses of hydrogen, we will need to look at the option of using it to heat buildings before taking a decision, particularly given the other alternative uses of hydrogen.
Just let me explain what the support is: £37 billion for consumers so far this year and a £450 million boiler upgrade scheme. The hon. Gentleman might talk about fuel poverty, which is a very serious issue, but I remind him that it is of course a devolved issue in Scotland. I have reason to believe that he may know one or two people in the Scottish Government, so I urge him to direct his inquiries on fuel poverty to his party colleagues in the Scottish Government. Of course I am happy to take his intervention, if he will tell us whether he has raised the issue of fuel poverty with the Scottish Government.
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My constituents are therefore particularly exposed, both to the recent increases in the price of heating fuel and to any policy changes the Government might bring in to decarbonise their fuel source. We know—but it bears repeating—that prices have typically increased by some 150% over the past year. Eye-watering sums have been quoted for some of my constituents. On top of the fact that so many households and properties in Ceredigion are not connected to the mains gas grid, our housing stock is very inefficient, primarily because it is quite old. In neighbouring Gwynedd, some 56% of the housing stock was built before 1945. In Ceredigion, only 36% of homes reach a C rating on the energy performance certificate standard.
As part of this conversation about how we transition and decarbonise fuel sources for off-grid properties, we seriously have to look at energy efficiency measures. The right hon. Member made the case far more eloquently and persuasively than I could, but I will reiterate that if we are serious about this, we need to improve the energy efficiency of our housing stock. Only 2% of homes in Ceredigion were built after 2012. The vast majority of the housing stock to be built for Ceredigion by 2050 has already been built. We need to renew our focus on energy efficiency measures.
We also need to accept the fact that for many rural households this will entail greater Government support. The case has been made already, but I want to reiterate it. Rural households tend to have lower incomes than our urban compatriots. We cannot afford some of the measures that have been proposed. Many of my constituents would desperately like to insulate their homes, improve the efficiency of their homes and install a number of measures, including in some instances heat pumps—be they air-source or ground-source heat pumps—but they simply cannot afford the cost.
I would like to mention the impact that the current crisis is having on businesses. We need to think about how we include them in our efforts to decarbonise our off-grid properties. One hospitality business in Ceredigion —it is off-grid—has informed me that its energy bills have increased by some 450%. It is, without putting too blunt a point on it, making them consider whether they can continue in business. It is otherwise a very profitable, successful business, but this hike in fuel prices for off-grid heating has caused them to consider their future. I do not think that good businesses like that should be allowed to fail because of the current crisis. As part of the debate, we need to look at interim measures that the Government may wish to consider in order to give them some short-term support. That business is very confident that if it can ride out this current storm, it can return to a very profitable, successful situation.
In addition to businesses, we need to remember the community groups and assets in rural areas and in off-grid properties that are also suffering. This morning I spoke to the people who run Calon Tysul, a community-run swimming pool in in Llandysul in the Teifi valley. They informed me that they are now spending as much as £1,500 a week just on fuel to heat the swimming pool, not accounting for the heating costs for the other section of the facility. They are already having to consider very difficult decisions, which they do not want to make, about scaling back swimming lessons and the like.
That group is in an interesting situation, because it does have plans to decarbonise its heating sources—for example, it plans to instal solar panels, which will drastically reduce elements of its heating and energy bills. The problem is the timescale. The group cannot quite make it through the current six-month period without having to seriously scale back their operation. So my question for the Government is: what interim, short-term measures can we put in place to help organisations such as Calon Tysul, and other community swimming pools and leisure facilities, to see out the current storm?
I fully support the need to decarbonise our housing emissions and the fuel for off-grid properties in general. The Department for Business, Energy and Industrial Strategy has estimated that some 20% of our off-gas grid homes are technically unsuitable for low-temperature heat pumps, but analysis, undertaken by firms such as Equity, found that 44% of rural homes currently using heating oil can be considered “hard to treat” when the cost of the transition is taken into account.
I have already mentioned the age of the housing stock in many rural areas, which is a real issue. As the right hon. Member for Clwyd West mentioned, we not only need to consider the cost of the measures themselves, whether heat pumps or something else, but the associated installation requirements have to be put in place for people to get the best out of the technology. The right hon. Gentleman quoted the heat and buildings strategy and its assessment of the current cost of heat pumps, but for the average off-gas grid home it is £12,000, and potentially a further £2,000 if measures such as cavity wall insulation are included. I realise that the heat and building strategy refers to the cost for the average off-grid home, but we need to reiterate the fact that in many parts of the UK the cost will be far greater.
I think of my own constituents in Ceredigion, where some 35% of homes were constructed before 1900. Over a third of the properties in Ceredigion were built in the 19th century, which is striking. I am not an expert, but I would imagine that the cost of insulating those homes and bringing them up to the relevant EPC rating to allow them to benefit from measures such as heat pumps will be significant. I am not surprised in the least that a whole range of analysis has suggested that households living in such areas will find it almost impossible to afford the up-front cost of many of these measures.
I know I am repeating myself, but it is important to make the point that we need to improve financial support for these households. Many of them will be able to afford other measures—I am not saying they are struggling, as such—but they will not be able to afford the additional cost of retrofitting their homes and installing some of these low-carbon technologies.
I am conscious that I am at risk of detaining the Chamber for too long, but I would like to ask the Minister a couple of questions and I would be grateful if he could address them in his response. We know there are various support measures for hydrogen development, for example, but there are questions about the extent to which they will be applicable to rural off-grid homes. The Minister and I had an exchange in the Welsh Affairs Committee on this point, and I am interested to know his thoughts on supporting the roll-out of local carbon gas alternatives such as BioLPG, as mentioned by the right hon. Member for Clwyd West. It is drop-in technology that could well offer us a short to mid-term solution if we are keen to decarbonise homes in rural setting.
I end by asking the Minister how we can support rural properties, whether domestic households or businesses and community groups, to weather the current storm. I know that there are a whole range of exciting projects in Ceredigion, where we have housing associations retrofitting houses. We have groups such as Llandysul, with some plans in the pipeline, but they face a period of six to nine months of real difficulty. Is there something that the Government could do as a short-term measure, just to see them through?
One couple who live in an off-grid house have contacted me to say that they have been quoted over £1,000 to fill their oil tank. That is more than their monthly income as a couple, and the problem is that they have been told they cannot place orders for volumes less than 500 litres. If it were possible to have some clarification on that point, it would be very welcome, because other households in Ceredigion have also told me that they would be able to afford 250 litres at the moment, but the 500-litre minimum is a stretch for them at current prices, and they cannot quite make it. I appreciate that that is a very short-term measure and that it is addressing an immediate problem rather than something in the future, but if we are talking about a just transition, we need to make sure that everybody comes along with us and that nobody shoulders a disproportionate amount of the cost of what we should all hope will be a shared endeavour.
I have looked at this issue across not just the home energy sector but the transport sector, and I sincerely believe that drop-in fuels have to be part of the solution. An example is renewable liquid gas, which is a liquid fuel that resembles the same chemical and energy content as LPG but can be used as a drop-in fuel for existing infrastructure, boilers and solutions in people’s homes and businesses. However, it is produced through technology that utilises renewable feedstocks, meaning it has a low carbon content when compared with conventional LPG. Due to the drop-in nature, renewable liquid gases effectively utilise all of the existing infrastructure to deliver affordable decarbonisation solutions, particularly to the most hard-to-treat domestic and non-domestic properties that are off grid.
As rural electricity grids might need costly reinforcements as electrification marches forward in our country, as more and more people have a greater demand for electricity, not least for their personal transport and their cars, choosing a drop-in fuel solution for home heating and cooking may save not just the taxpayer money, but money and hassle for the citizens of our country as the infrastructure upgrades involved are either non-existent or very minor, as some heating engineers have told me—perhaps one or two filters in boilers having to be swapped out.
However—this is the problem that I bring to the debate this afternoon—there is currently a lack of recognition, particularly for renewable liquid gas and drop-in fuels more widely, from the Government and some suppliers. The key to enabling the supply and production of renewable liquid gas is a supportive political framework orientated to the long-term benefit of many families and businesses in off-grid locations. Are we not all seeking cost-effective and convenient decarbonisation solutions? It is critical that the upcoming biomass strategy explicitly recognises renewable liquid gas to ensure continued funding and development in this area. Affordable clean energy for families and businesses is key if we are to meet the 2050 net zero ambition.
Electrification is not always economically and technically feasible, especially not in the short term. Purchasing or, worse, borrowing to purchase expensive heat pumps and energy renovations is simply not a realistic option for many of my constituents and many off-grid people and businesses across our country, so I urge my right hon. Friend the Minister to give us the good news that drop-in fuels and renewable liquid gas can be seen as a core central plank to the Government strategy going forward, so that we can avoid the cliff edge where people who cannot afford it or people whose homes cannot be fitted with it are not left with a singular option that does not work for them in future.
First, there have been concerns that rural homeowners and businesses will not be able to afford the high costs associated with heat-pump installation, and I believe that is the reality. There is an understanding that Ministers are “hoping” that costs will come down—I am not sure quite how realistic that is. Perhaps the Minister could say whether we are beyond hoping, and that we are looking at the practicalities. We must do that to be honest with people as we move forward.
The average cost of a heat pump in an off-gas grid home is £12,000. I think the hon. Member for Buckingham referred to £30,000—I suppose it depends on location, but the costs could range from £12,000 to £30,000. On the cost of living crisis, there is already an average fuel poverty gap for rural households of £1,213 compared with £856 for urban households. Again, that underlines an issue that every hon. Member has referred to: the clear poverty gap between rural and urban communities, where the cost is high in urban areas but not as high as it is in the countryside. There is a much earlier transition phase for rural homes, so Calor is asking for clarity on how the Government plan to support that early transition. The Minister has great knowledge, energy and interest in the subject, so we are looking for some answers, which I am sure are already at his fingertips. We look forward to what he has to say.
In relation to Northern Ireland, residential heating is increasingly important. As of 2019, the residential sector accounted for 14% of Northern Ireland’s total greenhouse gas emissions, primarily through fossil fuels. That evidence highlights the need for more off-grid gas homes. Great efforts have been made to compensate for the potential lack of progress. The Government’s Climate Change Committee has recommended that at least 25% of heat supply in Northern Ireland should come from low-carbon sources by 2030. Why not start in the most residential places—our homes? Some may feel that their home is where their business takes place most of the time.
I know that the Minister, who was in Westminster Hall on a different issue earlier this week, has regular contact with Gordon Lyons, the Minister at the Department for the Economy. I know they are in contact regularly—if not every week, certainly every time an issue comes up—so I would be keen to know whether discussions have been held on the matter with the Minister responsible in Northern Ireland, and what has come out of those discussions. I believe that we can always learn from each other. I certainly would like to hear the Minister’s impression of what contact or co-operation he has had with the Minister in Northern Ireland to see how we can take the issue forward.
It has been argued that heat pumps are the most feasible low-carbon system for domestic settings. These buildings are not seen as hard to treat, and energy can be improved at a lower long-term cost. There are countless alternatives to consider for low-carbon homes and businesses, the most popular being solar, heat networks or hybrids. Whether people use one method of heating or two, many want to have the option.
Further to what was said earlier, we rely on hope that the price of heating pumps will go down; the Minister might be able to give us some realistic figures for how that can be achieved, if it can be achieved at all. A heating pump is seemingly the most sustainable way to attain a low-carbon home. However, if that is not the case in the coming years, I believe that the Government must make efforts to incentivise people into becoming more eco-friendly when it comes to heating their home.
Belfast Telegraph, one of the provincial papers in Northern Ireland, reported:
“70% of people in Northern Ireland cut back on food payments, to pay energy bills and heat their homes.”
Big decisions have to be made, perhaps more so today than ever before, and I am sure that that percentage is similar across all of the United Kingdom of Great Britain and Northern Ireland; I do not think that we are any further behind or further ahead in Northern Ireland.
We must do more to support people through the transition to sustainable and green energy, as it is a process that we were all encouraged to be part of; indeed, we are happy to be part of it, although I acknowledge that that comment applies within the confines of the financial constrictions that everyone is facing.
To conclude, I am in full support of discussing and putting into action the process of achieving a low-carbon future. However, we must acknowledge that there are some issues that need to be addressed; I think the Minister is the person to give us answers in that regard. Cost is certainly a major factor in this discussion and I, for one, hope that the Minister and our Government can communicate with the devolved nations to make the transition as smooth as possible, so that we can all move forward together. As I always say, we are always better together. Let us share our points of view; I look forward to our doing things better.
The hon. Gentleman also talked about the affordability issues, as did the right hon. Member for Clwyd West, and the impact on rural businesses, some of which are being hammered just now; these are successful businesses that are off-gas grid, but they are being hammered by increasing costs. If these businesses are struggling with bills at the moment, where on earth do they find the money to invest in changing to new technology, if there is not more support, which is what the Minister must come up with now? The hon. Member for Ceredigion rightly asked how we can support people and businesses to weather the current storm. It is worth pausing to consider the fact that inflation is now at 11%. This is an absolute crisis that we are in just now.
The hon. Member for Buckingham (Greg Smith) pointed out, absolutely correctly, that the efficiency of heat pumps relies on high-standard insulation. However, in rural communities—this was a point well made—buildings are often older, draughtier and not perhaps the ones that can best cope with new technology. And all the people who live in those buildings and all the businesses that operate in such buildings face a crisis, right now as well as into the future. The hon. Gentleman also talked about drop-in fuels; that is another issue that needs further debate, but I come back to the fact that these things still involve a high cost, and there is a current crisis.
The hon. Member for Strangford (Jim Shannon) talked about options being very limited for those who live in countryside areas, which is absolutely bang on the money, and is also true for businesses. A theme is building here, which the Minister and his Government will have to address: this is a growing crisis for all these people. As the hon. Member for Strangford said, Ministers should have the answers, and we need to hear those answers. We need to know what the Minister is going to do, because the hon. Gentleman was absolutely right that hoping that costs will come down is just fantasy; it is not going to happen, so what will be done to address these average costs of £12,000 that we have talked about, or even higher—£30,000? The hon. Gentleman said that we must do more to support people through the transition. We should not only be doing more to support people through that transition, but doing more to support them right now.
I am pleased to be summing up this debate for the Scottish National party, because I tabled a ten-minute rule Bill in recent months dealing with the issues that people in off-gas grid areas are facing at the moment. We need measures across the piece to ensure that households do not have to pay more for their energy because they do not have access to a mains gas supply. The current price cap introduced by the UK Government and Ofgem is based on the assumption that households across the nations of the UK consume energy with a split of 80% gas and 20% electricity. However, that is not the case in rural areas, where if people cannot afford the fuel oil or to have the LPG on, they are using more electricity—they are using more electricity anyway, because they have to.
Across the nations of the UK, one in six households are living off the gas grid, not just those in rural areas; we must be aware of those figures. The rise in fuel costs that those people are facing at the moment is more than twice that of those on the gas grid. If we treat the average household as having to pay £2,000 per year now —as we know, it will be more—those off the gas grid will have to pay £4,416, according to the most recent calculation. Again, that figure is probably out of date; it has probably gone up as inflation rips through the economy. Rural areas have higher transport costs, higher costs of living, older properties and lower than average incomes.
I have to ask, because I have the opportunity to do so, what is the point of a UK energy regulator that is not regulating for people who live off the gas grid? That deficiency has to be challenged by the Government; I know they will lay the blame at Ofgem’s door, but the Government can do something about it as well. We need an urgent review of regulated energy prices and an end to the discriminatory system for people who are off the gas grid.
The Climate Change Committee said recently that it is still disappointing not to see more energy efficiency, or support for households to make changes that can cut their bill. The UK Government have fallen short in that area time and again. As has been pointed out, they can do a lot more to help people, such as by using some of the additional VAT they are getting in or cutting VAT. The Scottish Government have helped 150,000 households that are either in, or at risk of, fuel poverty, and Scotland is way ahead of England when it comes to spending per capita, spending £27 on insulation as opposed to £8. This UK Government need to do more, and I look forward to hearing from the Minister whether he will take action to address these problems—not only the future problems that people off the gas grid will face when they have to make these changes, but the current problems that people are facing across rural areas in all the nations of the UK—problems that are deeply affecting them, their families and their businesses.
Off-grid properties do not have the same range of longer-term choices available to them. We cannot decide that all the off-grid properties will go on to hydrogen, because we cannot get hydrogen to the off-grid properties. We cannot go for district heating solutions with off-grid properties, because they are generally in too sparse a layout to make district heating efficient or feasible. There is a narrow range of choices for off-grid homes.
I would not be in favour of taking a break in our plans to move to low carbon, as the right hon. Member for Clwyd West suggested this afternoon, to get our choices right. The replacement turnaround time for the types of heating in those off-grid properties—the boilers and other apparatus—is about 15 years. That is slightly longer than for boilers in urban properties, because oil-fired arrangements and so on are often set out differently. If we take that normal replacement turnaround time, and we pretty much start now with replacing those boilers with low-carbon alternatives as they come up for replacement, the cycle will have been completed by the early 2040s. That is within the 2050 target for low-carbon replacements. If we put our plans off, we simply would not replace the boilers as quickly as otherwise. That suggestion assumes that we are being very careful to undertake the replacements with the active will and participation of the people who live in those homes, as the right hon. Member for Clwyd West enjoined us to do—that we are not marching in and ripping boilers out, and demanding they do things on the spot, whether or not their arrangements are obsolete and whether or not they can afford the changes.
I have considerable sympathy for the Government’s problem of how to go about decarbonising the sector. The Government have chosen, in the first instance, to go for a heat-pump-first solution—to prioritise heat pumps as the replacement arrangements in those homes. As hon. Members have pointed out, heat pumps do not always work in those homes, and they certainly do not work unless the energy efficiency is substantially upgraded. Given the homes we have in that group, heat pumps might require a whole-house refit, including the gauge of pipes and various other things related to the central heating, in order to work as well as they should. The cost of the heat pump is therefore not the only cost for those off-grid homes. Quite a lot of other work is also required.
I think we can question whether heat-pump-first is the right way to go about this plan. It is not that they should not be a substantial part of the process but, as has been said, a number of other options are available that ought to and could be considered alongside heat pump installation. We might undertake a more horses-for-courses arrangement, because of the variety of off-grid homes that we need to decarbonise.
I am sorry to say that such an approach was not apparent in the consultation that closed just recently, “Phasing out of the installation of fossil fuel heating in homes off the gas grid”. I hope right hon. and hon. Members all got their submissions in; if they did not, it is a bit late now, but never mind—we are making up for it this afternoon.
The consultation missed out on providing a realistic appraisal of what alternatives to heat pumps there might be for off-grid homes. The consultation mentioned some, but merely said it would look at and appraise them and possibly consult at a later date. That is not the way to go about it—we our ducks in a row before we start consulting about what we will do on alternatives to high-carbon heating in homes.
As right hon. and hon. Members have mentioned, the alternatives are several. Some are very promising, some less so. Certainly, as the hon. Member for Buckingham mentioned, hybrid heat pumps—I have been to see a couple in operation in south Wales—do a very good job of arranging for the boiler to continue to operate, but as an auxiliary to other kinds of heating, which was an air source heat pump in this instance. The pumps do that in such a way that completely redoing the central heating, and so on, in the home is not required. The house can work very well with a combination of technologies working together effectively to decarbonise the heat in the home.
Biomass pellet boilers certainly can be considered in homes, as indeed can renewable LPG. As hon. Members have mentioned, LPG is a drop-in fuel that can be put straight into systems—more or less, but not quite—as they stand. The issue with renewable LPG is whether we can get enough of it to work well in systems if we use it on a widespread basis, because it is a particular by-product of other processes that are limited in total size.
The Government also ought to be considering, just as they should with hydrogen, the best uses for the alternative fuels. For example, what are the lowest-carbon uses for LPG or hydrogen? Do we put all our hydrogen into heating homes, transport and logistics, decarbonising heavy industry, or whatever? The Government must make that choice in terms of the priorities they put forward for those different forms of low-carbon fuels, and bioLPG is certainly one of them.
I would criticise the Government not on their timescale or their ambition to decarbonise the off-grid area, but on the fact that they have not looked properly at the options that could be available to decarbonise those off-grid properties in the most efficient way. The Government will have to work on rectifying that if they are to get public backing for that decarbonisation over the next period. That is essential in getting not only off-grid properties decarbonised efficiently but, in general, our homes heated in a low-carbon way. Certainly, if the wider debate ends up with people marching down the street protesting that the Government are ripping out their boilers in an assault on their liberties—because they do not have a decent option to decarbonise by consent —then we will not have achieved our objectives at all.
In the debate on energy prices, as hon. Members have mentioned, we ought to recognise that off-grid properties are suffering far worse than on-grid properties from the energy price crisis. First, the average bill for an off-grid property tends to be higher, but also the fuels used for off-grid properties are not subject to the price cap. Off-grid fuel price rises have far outstripped those for on-grid customers. That, I think, is something that the Government ought to take account of in their approach towards underwriting and assisting those properties with their energy costs in future.
The issue is not strictly the subject of today’s discussion but clearly comes into how we ensure that the public are properly behind the decarbonisation of their properties across the board, and particularly in off-grid areas. I do not envy the Minister the task of getting that right, and I know that it is a real knotty problem, but I am sure that he will be able to provide us with some good pointers to ensure that we decarbonise our off-grid properties in the most efficient way that we can, and with the most public support that we can get.
As my right hon. Friend very ably said, most off-grid properties will ultimately transition to heat pumps, which are a proven and highly efficient technology. In electricity, they benefit from a secure energy source that is not subject to the same price spikes as oil, and critically, they are consistent with net zero as the electricity grid decarbonises. Heat pumps have been successfully deployed in high numbers across the world, including in countries that are colder than the United Kingdom, such as Sweden and Norway.
The up-front cost of installing low-carbon heating may be prohibitive for some, however, and I think that is the core of the question before us. That is why we are investing £450 million through the boiler upgrade scheme to provide £5,000 grants towards the cost of installing a heat pump, and £1.1 billion through the home upgrade grant to help lower-income households off the gas grid to upgrade their energy efficiency, save on bills and transition to low-carbon heating. That funding will help to kick off our wider plans to grow the heat-pump market to 600,000 installations by 2028 and to deliver on our ambition to reduce the cost of a heat pump by between 25% and 50% by the middle of the decade.
Alongside our action to remove distortions in energy prices—starting with the launch of our proposals to rebalance energy costs later in 2022—we anticipate that heat pumps will be no more expensive to install and run overall than gas boilers by the second half of the decade. That is why we consulted last year on regulations that would end the installation of high-carbon fossil fuel heating systems off the gas grid later this decade. I reassure my right hon. Friend that we will take every step to ensure that the transition to clean heat will be fair and affordable for off-gas grid households and businesses.
I also reiterate that our continued support for decarbonisation policies relying on heat pumps is contingent on the industry taking action to drive down the costs. By signalling now our intention to take the action later, once the cost of heat pumps is much lower than today, we aim to give industry the long-term confidence to invest and drive the costs down. We will also keep the cost of heat pumps under constant review. Making sure they become more affordable is a key part of Government policy and, well ahead of implementing any regulation, we will set out what additional actions may be needed to support the phasing out of high-carbon heating systems.
I also take the chance to reassure my right hon. Friend the Member for Clwyd West that no one will be required to install an unsuitable technology in their home or business. We know well that heat pumps will not work everywhere, at least not with the current technology. Some off-grid properties are simply too poorly insulated or have certain characteristics that would make installing the technology impossible. We will take care to ensure that that group of hard-to-treat properties will have access to suitable alternatives, such as high-temperature heat pumps, solid biomass and so on, which I will explain in a little more detail.
My right hon. Friend the Member for Clwyd West raised various points. I believe his central question was: why off grid first? Off the gas grid, there is currently no strategic option to decarbonise heat with hydrogen or other technologies. That is why we are taking a range of actions to bring forward the decarbonisation of this critical group of buildings. If we can make heat pumps affordable, there are considerable advantages in moving forward, including for off-grid households and businesses, even if that means that they will be required to switch from fossil fuel heat earlier than their on-grid counterparts. My right hon. Friend asked me to reconsider the 2026 deadline. Equally, the pace at which we can make heat pumps become affordable will guide our decisions on the right time to introduce regulation and the other actions needed to make a fair transition.
My right hon. Friend asked how many off-grid homes are hard to treat. Our analysis shows that 80% of off-grid homes already have sufficient insulation for a heat pump to work effectively. They have already been deployed successfully in high numbers across the world; I mentioned Sweden, Norway and other countries. On his questions about hybrids and biofuels, along with those from my hon. Friend the Member for Buckingham, we would like to see those fuels become another solution, particularly for off-grid properties that cannot use a heat pump. We are working closely with industry to build the evidence that will inform the biomass strategy mentioned by my hon. Friend, due to launch later in 2022. The strategy will review the amount of sustainable biomass likely to be available to the UK and set out how this can be best used across the economy to achieve our net zero targets.
My hon. Friend the Member for Buckingham asked for some good news. I think I have been bringing quite a lot of good news so far. However, we are also investigating whether hybrid systems could give hard-to-treat properties additional choices and that is an area of active investigation, as we also ask whether they have potential to help us stretch limited bioresources further. I urge my hon. Friend to wait for the biomass strategy later this year. There are key considerations there in biomass production, alternative uses and trying to get a sense of where that overall market will be heading. In time, renewable liquid fuels such as HVO and bioLPG may also play a role, although they are currently in short supply and more expensive for households to use. We need to better understand the scope to expand production of those fuels for use in heat, consistent with very low emissions while remaining affordable for consumers.
The hon. Member for Ceredigion (Ben Lake) mentioned those not subject to the energy price cap. It is worth remembering that the energy price cap, which predates me in this job, was not introduced to provide a blanket level of protection for all consumers, but was instead a specific protection brought in to remove the penalty for people who did not switch between their grid gas or electricity provider. That was the purpose of the price cap. I do not think it would be fair to say that the heating oil market or the market for off-grid properties is any less competitive. There is a highly competitive market in heating oil companies, and there is the ability for the Competition and Markets Authority to look at the issue. If the hon. Member for Ceredigion has evidence of anti-competitive practices, I urge him to bring it forward, send it on to me or speak to the CMA. That is exactly what the CMA is there for.
The hon. Member for Ceredigion mentioned the rules around heating oil providers not providing less than 500 litres. I urge him to speak to the UK and Ireland Fuel Distributors Association, which is a helpful trade body. I think the basic problem is that providing small volumes of heating oil is likely to raise fixed costs, and therefore to make an inefficient market with ultimately more expensive provision. His motive is a good one—to try to make heating more affordable, in smaller pieces, for constituents who are facing trouble with their bills—but the perverse impact might be to raise the fixed costs of such deliveries, but I urge him to speak to UKIFDA, which is the real expert.
I congratulate the hon. Member for Strangford (Jim Shannon) on being the chair of the healthy homes and buildings all-party parliamentary group. We are of course keen to see Northern Ireland, like all parts of the United Kingdom—I stress that it is fantastic to have all four nations represented here today—play its full role in decarbonisation, and to ensure that it is supported during times of high prices. He said that he had learned that I speak to Gordon Lyons, the Northern Ireland Minister for the Economy, frequently and perhaps even weekly. In fact, I spoke to him only yesterday about ensuring that Northern Ireland’s renewable energy opportunities are boosted. The hon. Gentleman will also know that one of the key reasons that we are taking the approach that we are on the Northern Ireland protocol is to ensure that things such as the VAT cut on solar panels can be enjoyed as much by the people of Northern Ireland as by the people of England, Wales or Scotland. Watch this space; we are always keen to help in Northern Ireland.
The SNP spokesman, the hon. Member for Inverness, Nairn, Badenoch and Strathspey (Drew Hendry), called UK Government support inadequate. Well, almost regardless of what we had announced as the level of support, I could have predicted that he would say that it was inadequate. I remind him—