Welcome, everyone, to the latest meeting of the Environmental Audit Committee for a review of the seventh carbon budget. We have three different panels within the session. I am very pleased to introduce our first panel: Chris Huhne, the chair of the Anaerobic Digestion and Bioresources Association—welcome back, Chris; Claire Dykta, the director of strategy and policy at the National Energy System Operator; and Victoria Whitehouse, the deputy director at the UKRI Industrial Decarbonisation Challenge. The first panel will be looking at the energy supply pathway for the seventh carbon budget. Will the three of you, starting with Mr Huhne, please introduce yourselves and your organisation, and say who exactly the organisation represents? Also, from your perspective, is the Climate Change Committee’s proposed energy supply pathway the optimal choice?

Thanks very much, Mr Perkins. I am delighted to be here. I chair the Anaerobic Digestion and Bioresources Association, which should probably be called British Green Gas, which would be simpler. Anaerobic digestion sounds like something you acquire and need treatment for at Boots, but it is dealing with any organic matter that you bang into a digester, and you can take out methane and CO2, as we will hopefully touch on later. We represent about 750 of the plants across the United Kingdom, some of which are now quite long in the tooth. In the UK we invented modern-day anaerobic digestion. The city of Exeter, in the 1890s, introduced it to do street lighting. What we have in the modern period, most recently under FiTs and ROCs, is biogas operating combined heat and power units. More recently, since the introduction of the renewable heat incentive in 2011, we have had direct injection into the gas grid with a purification of the CO2 out of the system. Then you just put the methane into the gas grid, and that is an exact molecular substitute for fossil gas but, of course, it is renewable. This is a technology that is renewable, ready and reliable. The key thing that I think the carbon budget does not yet do, and I understand why, is that it does not yet consider the potential benefits of biomethane to the whole energy system and, indeed, to the transition to net zero. I hope that we can touch on that later in the evidence session.

The same question to Ms Dykta.

NESO, the National Energy System Operator, is an independent body that is owned by Government but operates completely independent of Government. We are the world’s first whole energy system operator, and we are entrusted and charged with the strategic planning of the energy system here in GB, through to the second-by-second operation of the power system. Enshrined in our statutory duties is our role to balance the energy trilemma—look across the security and resilience of the energy system, the cost of our activity in that system in terms of balancing it, and sustainability. As part of that, one of the activities we undertake is something called the future energy scenarios, on which we work closely with the Climate Change Committee, to understand the relative pieces of work. The scenarios we create set out pathways for how you can reach a decarbonised energy system by 2050. It is a completely different activity from the Climate Change Committee’s CB7 advice, but it is worth noting that our pathways are similar, because there are not that many decisions and trade-offs that you can make.

From your perspective, do you think the proposed energy supply pathway is the right one? Or would you suggest the CCC looked in a different direction, as Mr Huhne did?

The key thing from a system operator perspective is diversification of the energy mix. As the system operator, I want to see that the risk across the system is diversified, because that is how you ensure it is resilient and secure. Both the Climate Change Committee’s pathways and we do that. There are a variety of different technologies in there. As I say, there is not that much difference between us, but the scenarios that NESO have published over the last year have done an awful lot of work with the biomethane industry, and we have that playing a critical role in the pathways we publish.

That is helpful. Thank you.

Can I add one point? The key thing is that the NESO pathways in 2024, on which the carbon budget proposals are based, did not include separate modelling of biomethane. The modelling now in 2025 does include biomethane, and NESO has recognised the benefits of biomethane. There is a big change since the modelling work was done on which the carbon budget was based. As a result, it makes the carbon budget easier to meet.

Ms Whitehouse?

I am from UK Research and Innovation, which is the national funding agency investing in science, research, and innovation in the UK. My particular role was focused on industrial decarbonisation, and particularly the industrial decarbonisation challenge, which set out to accelerate industrial decarbonisation at scale through the use of carbon capture and storage technology and hydrogen production. That programme was between 2019 and 2024. On your question about whether the delivery and the pathway are realistic, it is complex. I think there will be challenges along the way. If you look at the CCUS—carbon capture—and hydrogen, these are first-of-a-kind projects that are being delivered in the UK. These are new emerging markets that need market stimulus to get to a mature and stable state in the future. There are going to have to be some choices to be made along the way, but it is achievable. To give a small practical example, my recent experience is that the public-private funding mechanisms that are used through UKRI and Innovate UK offer credible ways to enable that delivery and that pathway. The carbon budget and the CCC also recognise that the pathway to get to net zero cannot be done without carbon capture and storage. Specifically, that technology exists now, but we now need the scaling, the investment and the sequencing of it. When I say “sequencing”, I mean in terms of building out from the existing established clusters and moving into those that are next in line. Through the implementation and delivery pathway, new research, innovation and development will emerge and needs to happen as a result. It will drive efficiencies. It will drive new technology. It will drive new ways of thinking and reduce costs, which will help to achieve our net zero commitment. The other—

I will stop you for a second because, on carbon capture and storage, you referred to a number of new technologies. There will be those who say we have been talking about carbon capture and storage for 15 to 20 years. It feels like if we had been sat in this Committee in 2010, it would not have sounded that different: “We’re almost there—it’s on the way. The technology is proven; we just have to develop it.” Give us a sense as to how much progress has been made in those 15 years. Are we really about to be at that moment where it breaks through, is cost viable and is going to step up and make a significant change?

If I refer back to the industrial decarbonisation challenge. Back in 2019, when it started, as you say there was probably a consensus on the goal, but there was not a sense of cohesion and confidence that there was a set and clear pathway on how to deliver the shared decarbonisation. That is quite important, because although the technology was in place and we knew about it previously, how it has been developed now and the approach that has been taken has been on a cluster basis. The uniqueness of this is that it is shared infrastructure. The programme did deliver at scale and pace, because if you fast forward to 2024, when the programme ended—so after quite a short space of time—the funded projects, of which there were nine, both onshore and offshore, had all reached a point whereby they had reasonable confidence in their engineering designs, in their costing, in the planning and consenting and in the procurement and contracting. This was a public investment of £210 million, but the private investment that sat alongside that was closer to £900 million, to get through all those different investment options. I think progress has been made, and because of the incentives and that clear direction, we have progressed in CCUS.

Ms Dykta, what are the key barriers to the successful delivery of the energy mix proposed by the CCC? Is there anything in NESO’s new approach that they could learn from? Mr Huhne, you have changed your views over the course of the last year; do you think that is something the CCC should be picking up on?

I would identify four key barriers. One is the process of connecting to the actual grid or the central network. If you are a new technology and you want to supply energy, you need to have a physical connection on to the grid. UK, and particularly GB, is a world leader in terms of how rapidly it has decarbonised its grid, and it is an attractive destination. As a result of that, we have a huge queue of people waiting to connect to the grid. The way that that process has worked historically is that it is on a first come, first served basis. As a result of that, we have more capacity sat in that queue than we will ever need—twice as much as we will need by 2050. NESO has worked closely with Ofgem—the regulator—and the Government to overhaul that. It is not a unique problem here—it is evident in a lot of the changing grids around the world—but the plans we have in the UK to overhaul that are the most ambitious ones we have seen. That is the first barrier. The second one is planning and infrastructure. In order to connect all of these new supplies of technologies you need the supporting infrastructure to do it. Nick Winser, in his report a couple of years ago, identified the delays caused by the planning process, and the Government have put in place measures to tackle some of those. At NESO we are charged with creating a strategic plan for the energy system that looks at what technology should be located where and what infrastructure is needed to connect that, to try to speed up that system. Within the topic of planning and infrastructure it is also important to think about communities. The reality is that the infrastructure impacts the communities that host it. It is important that communities are talked to and understand that and are brought along on that journey with everyone.

Ms Whitehouse, last year 0.03% of total global emissions were sequestered by CCUS. Are you telling us that you believe that in a timescale that is sufficient to achieve our targets, CCUS in this country is going to suddenly transform itself? We have been saying this for 30 years. We now have three years globally, at the present rate of emissions, to meet the 1.5° target—that is the carbon budget—and we have 13 years to meet the 2° threshold. Yet you are positing that all is well and we can do this, at least to meet our national targets. What gives you that confidence?

There are a lot of challenges and complexities that come with carbon capture and storage. However, from my experience of the industrial decarbonisation challenges and working with the clusters themselves, we have seen that they are able to collaborate and come together to overcome a shared problem. There are still barriers to that in terms of the regulation, the financial constraints and the signals to the market, but confidence has been provided through industry. They have made investments into this technology and—

Give us a timeline, then, because this is verbiage that we have heard for years. Give me a timeline for when you think there will be active sequestering to a certain extent—this many tonnes sequestered—by a certain date. We can then have some confidence and hold people to account. Without that it is meaningless, isn’t it?

Can I give Ms Whitehouse a couple of minutes and come in on Mr Gardiner’s point? There is a key missing opportunity here that the Government can pick up, and that can help both with the carbon budget and with the end state, and that is the process of ramping up biomethane, which is now going on at pace in France, in Italy—Germany already had it—and in Spain. When you strip out the CO2—that is biogenic CO2—if you capture that CO2, truck it and insert it into one of our hopefully up-and-running long-term storage facilities, you can make a real difference to CO2 capture right now with a technology that is completely proven, requires absolutely no further testing and is not on the lab bench. We can do that and get to 20% of the Government’s CO2 capture target for 2050—18 million tonnes of CO2. If we ramp up biomethane and simply capture it, truck it and store it in something like an old North sea gas field, we can get 20% of the target. You can do that over time from now, so that it really helps with the carbon budget. For the rest of it, I have to say I am sympathetic to Mr Gardiner’s line of inquiry. It is a bit like fusion—

You are a tremendous spokesperson for biomethane. Of course, we have to have the repositories ready and waiting to put it in. We have one part of this value chain that we know we have, but we need to see the whole thing, and we need to see when it is coming together and how it is going to be delivered. That is what I am asking Ms Whitehouse.

I am not sure that I am able to answer that question directly on the timelines.

Perhaps you could write to the Committee subsequently, after appropriate consultations.

Of course.

Can I clarify something? Ms Whitehoue, are you saying you cannot answer it because it requires someone else to make different decisions, or that you just do not have that information to hand at this moment?

I think that I can provide some information along the timelines, but it would be based upon experience of working with the industrial clusters as part of the decarbonisation challenge and speaking to colleagues within the research councils as well.

Claire, we are interested in electrification, and under the balanced pathway we are going to see demand for electricity increase from 18% to something nearer to 60%, aren’t we? We wanted to ask you about the barriers to upgrading the grid and how they can be addressed. You have touched on some of them already; do you wish to add anything else on connectivity and planning?

I would mention two other things specifically in terms of electrification. First, it is a no-brainer to go hard at energy efficiency, because it brings down the total demand you are trying to meet and is a low-cost option. The second one, which is in the similar vein, is flexibility and there are two parts to that. One is assets that are connected to the network that can help to deal with the intermittent nature of wind and the sun, so batteries and other forms of storage. There is also the flexibility that every one of us can provide as an energy user, whether that is if you are fortunate to have an electric car, whether that is using your electric car as a battery or shifting when you use appliances and things at home. Energy efficiency is about bringing the whole demand number down; flexibility is about smoothing the shape a little bit. Those two things bring down what we call peak demand—the highest demand you are trying to meet in the day—and that reduces your overall infrastructure build requirement.

Our task is to move witnesses towards recommendations. Might you have a view on the use of smart grids? Might you have a view around VAT on energy efficient products that you want to share with the Committee?

How you deliver some of those policy choices is a matter for Government, but I think the theme for all of us is that there is a need for joined-up policy thinking and moving through those steps. It makes sense to do energy efficiency first, to bring the number down, and then to do flexibility to smooth the shape. Then you get into connections, when you have lowered your infrastructure needs as much as you can.

So there should be a policy that incentivises behaviour change in both those areas.

Yes.

We read that despite their high consumption, data centres were excluded from the CCC’s modelling. Do you have any concerns about that?

I do not know what assumptions they have made about data centres in their modelling. Certainly within NESO’s energy pathways we do include data centres. As I say, our pathways are not materially different from the CCC ones.

One of the points you have not made in talking about the barriers to electrification is the cost of what needs to be done. The Green Alliance has said that the biggest risk to electrification is the cost of electricity. As you have pointed out, we are going to have to upgrade the grid from wires coming out of a single power station for the equivalent power of 150 turbines, plus all the planning that is required around that. From a politician’s point of view and a consumer’s point of view, is the cost of that not a significant element in the whole electrification requirement for the carbon budgets?

Cost is really important. I mentioned earlier the energy trilemma; that has been the terminology that has been used for as long as I can remember for a reason. From a consumer perspective, you want a secure and resilient system—preferably something that is clean—that brings all the wider benefits but, crucially, one that is affordable and efficient. I talked about the scenarios that NESO has undertaken, which we published earlier this year. We have actually costed those scenarios, and we are about to publish the work from that, so it should be published later this month. I would be happy to send that to the Committee when it is published. The decisions on how the cost of the transition end up on energy bills are policy decisions for the Government, but when you are thinking about cost and balancing those elements, the shift to renewables is one of the important things that helps to unlock it. Thinking directly about NESO’s costs—not the costs of running our organisation but the costs of operating the electricity system and keeping the lights on—by deploying new technologies and thinking differently about how we run the system, we have been able to save £1.2 billion of costs for consumers. The delivery of some of the infrastructure you referred to, which we have said needs to be built by 2030, would reduce the cost of balancing the system by half, from an anticipated £8 billion to £4 billion.

According to the last figure I saw, the distribution costs and the investment required for the future currently account for nearly 45% of people’s electricity bills. It is difficult to see how you can get around this issue of cost. Might it be a significant barrier to electrification?

There is an investment in the network infrastructure to connect all of this. As the regulator, it is Ofgem’s role to work with the network companies to ensure that what they are spending on the network is efficient.

Can I come in on this, Mr Wilson? I was shocked, not just as a reformed politician but as a reformed economic modeler, to discover that NESO has not been modelling biomethane separately. We commissioned Business Modelling Applications, as a big modeler with a very detailed model of the UK’s whole energy system, to look at how much we could save if we actually put a dispatchable renewable source into the system. The modelling work we did, which sparked NESO to then start modelling biomethane separately this year, showed that we would save £498 billion, at net present value, over the whole period to the transition to net zero in 2050.[1] That works out at £415 per UK household per year, so it is a very substantial economic saving. What is basically going on is that if you are using a dispatchable resource, you are not having to push any other—to the diversification point that my colleague just made—source so far up its cost curve that you are having to exploit really expensive offshore wind sites, for example, or onshore wind sites, or hydrogen. You get greater diversification and therefore lower costs for pretty much everything. You need less transmission in terms of the transmission grids because the gas grid is available, and 10 cm of pipe on the gas grid can move four times as much energy at half the cost of a 10 cm electricity cable. These are really big savings if you diversify your sources of energy. I totally agree on energy saving, but politically that is about the most difficult thing you can do. My biggest failure as Secretary of State was getting energy saving through. Electricity market reform worked and the renewable heat incentive worked, because those are relatively easy; energy saving is really difficult.

One of the assumptions seems to be that we will use the gas grid—which we have, albeit it is being used less because of the falling demand for gas—for a certain period of time and then decommission it. My only experience of this was long ago when I was the chair of the gas committee for Belfast city council. We had our own gas production network across the city and thought we were going to make piles of money from it, but it cost us an absolute fortune to decommission. Given that a lot of industry is saying that to electrify, even getting the supply to us would cost a fortune, do you see a role for the gas network in avoiding the electrification of energy-intensive industries and using a resource that we could then enable them to change to a different form of fuel?

I think the gas network is going to be absolutely crucial to a lot of the electrification as well. Yes, it will be useful as a direct supply to hard-to-decarbonise industry, because biomethane can do absolutely everything that hydrogen can do, but also, during the cold winter months of December, January and February when there is hardly any solar yield—because, as we all know, it gets dark very early in the day, just as people are turning on their television sets to watch Corrie or whatever it happens to be—you need back-up, which has to come from somewhere, and the gas grid is a very effective way of doing it. There will be bits of the gas grid that get decommissioned over time. What the modelling we did showed was that the fundamental electrification continues and that heat pumps are absolutely crucial to doing that in people’s homes. However, there are hard-to-electrify bits, which you either have to do through district heating or you have to do with some sort of hybrid boilers. You will probably need a gas grid for that, and you need the high-pressure gas grid because when you are providing back-up for the electricity system in December, January and February, you need to be able to run combined cycle gas turbines, to switch on very quickly and make sure the electricity is there. If you are going to do that, you are going to need a spine of at least the high-pressure gas grid. I personally think it would be very odd to do a centrally planned view that you are going to get rid of the gas grid by a certain date, and leave it up to the market to decide which bits of the gas grid are going to be retired early, with electric heat pumps no longer requiring the gas connections. Our modelling from BMA, which is entirely neutral as to particular types of technology, strongly suggested that the gas grid will go on having an important role to play in a net zero economy.

If we make the assumption that eventually we will decommission the gas grid, given that we are already struggling with the upgrades to bring electricity from diverse sources and from very many renewable sites, and also given the increase in demand from electric cars, heat pumps and everything else, and then industry requiring a significant upgrade, is it realistic to think that we can do without a gas network of some sort? I met cruise industry representatives the other day, and they were saying, “Look, part of our decarbonisation programme would require there to be an electricity supply at ports.” Very few ports say they could actually do it, even if they wanted to, because of the infrastructure that would be required. If we are going to keep costs down, do we not need to keep alternatives rather than simply say we will go for electrification?

As Chris was saying, gas currently plays a really significant role. It is still providing over 60% of our domestic heat and directly providing about a quarter of electricity generation. For at least the short term it will play a really critical role in the transition, for the reasons that have been outlined. Going forwards, I agree that it should not be a national top-down decision, if you like, but one of NESO’s roles, as well as its national planning role, is to do that role regionally. The country is being split up into regions, and we have a role to work with councils, local industry and the transport infrastructure and look at all of the elements of an area—the housing stock, the industry needs, the transport infrastructure—and say, “What is the right solution for that area?” It might be electrification, it might be biomethane in the gas grid, or it might be heat networks, but it will be done on a place-based process. You knit it together that way rather than taking an overarching decision.

Ms Whitehouse, to return to some of the conversations we had earlier, it often feels that we assume we will have the technologies like CCUS and hydrogen at the necessary scale on time, simply because we must. Could you set out some of the biggest risks and challenges that we face for delivering those technologies on the timescales we need, particularly in relation to dispersed sites, since you have mentioned clusters quite a lot? Do we have the necessary workforce to roll out these technologies at the pace and scale we need?

Thanks for the question, which is quite wide-ranging. I am going to tackle the dispersed sites element first, because I have not picked up on that previously. Dispersed sites are those industries that are mainly inland and not located in or near our major industrial clusters, those being co-located energy-intensive industries around our major UK ports. The dispersed sites account for the other 50% of our industrial emissions, so they are not insignificant. They have had limited funding or pockets of funding to this point, mainly around plans and looking at specific feasibility studies to consider what options are available. From my experience of working with them, it has been difficult to really identify clearly the best choices for the dispersed sites, for various reasons, but they do not benefit from the same level of shared infrastructure as major industrial clusters, so they do not have the same economies of scale to draw upon. They cannot easily access the pipelines, and this carbon budget involves a network of pipelines becoming available in the UK. There are capture site challenges as well, including land constraints, the availability of land, the cost of installing the equipment and the cost of actually changing the process. The transport and storage network in the UK will also play a really critical factor for dispersed sites. It is not currently there for CO2 or hydrogen, so there is that uncertainty around the T&S work, and they need that to be in place for the decarbonisation pathway. The other point is around the actual volume of CO2. A lot of these have much lower volumes of CO2 that need to be captured, and then they have to factor that into their commercial decision making and the levels at which they can capture. Do they need to look more broadly in their regions to other carbon emitters that they could combine with to increase the level of CO2, which makes it more competitive for transport and storage? Some of the challenges around the major clusters are things around technology selection. As part of my experience with them, I know that the risk profile of innovative solutions over proven technology is high, meaning that companies opt for the proven technology to reduce their risk profile, whereas some of the innovative technologies may well be able to reduce costs or improve efficiencies. If you then consider the system design—coming back to the shared infrastructure point—decisions made by individual projects can actually impact multiple players across the value chain, which can then lead to significant rework costs and uncertainty if they have to go through that process. The other challenges and risks are around the regulatory challenges. Projects would welcome more clarity and more information on the UK’s long-term hydrogen and CCUS strategies, to feel comfortable investing significant capital. If we think about procurement, the cost of building the infrastructure, and the time, resources, labour and materials, we then also look at the supply chain, and that requires greater visibility and knowledge of the time, labour and resources to help them to scale their operations.

“Greater visibility” is slightly euphemistic; can you explain in clearer detail what you mean by that?

Of course. At the moment the supply chain can only visibly see the track 1 clusters progressing in CCUS and hydrogen production. They need to see the long-term pipeline of projects coming forward before it becomes competitive and commercially viable for them to invest in scaling their operations and targeting this new and emerging market in CCUS.

Thank you, that is really helpful. There was a lot of useful detail in there. It sounds like there are a lot of big question marks, so my next question is again to you, Ms Whitehouse, and also to you, Ms Dykta. The CCC has called for a contingency framework in case we do not deliver some of these technologies at the scale and pace necessary. What would you like to see in those contingency plans? Crucially, we have had written evidence suggesting that we need to be implementing contingency plans now, because they are not something that you can just switch on and off. Things like demand management and modal shift will take time. Do you think we should be implementing contingency plans now, so that these measures are in place should we need to fall back on them?

First, I agree that there needs to be certainty of the vision—where we are trying to get to and the policy frameworks around it—because that is what drives investment in the supply chain, which creates jobs, which creates opportunities in local communities. Contingency frameworks do not provide that certainty, so you have to be cognisant of the policy framework that is being created. Secondly—I think you might roll your eyes a little at this—we have a huge track history in GB of deployment of new technologies in a successful manner. We have been in this position with offshore wind. We have been in this position with biomethane. There is a can-do attitude here that requires the policy environment and the certainty to unlock the investment. There is plenty of mobile capital wanting to invest in these technologies, in the supply chains and in jobs in GB, and the certainty in direction and the certainty of the policy framework will unlock that.

I agree with Claire. Also, if we think about the reasons why industry might go slower, it can come down to factors like they do not want to take the investment risk, the costs, and the lack of clear market signals. So it comes back to some of the points that have been made already. I would encourage continued engagement with industry and consideration of the incentives that might be needed to stimulate the market to a point where it can become self-sustaining, because that is our end goal at the end of the day. Through the industrial decarbonisation challenge, I have also seen that collaboration and knowledge sharing is really quite powerful. It is a useful mechanism to identify the challenges and where the barriers are, and actually look at, “Okay, so how can we overcome these solutions and what would we need to put in place to help us to overcome them?” To come back to an earlier point, the supply chain is going to play a really crucial part in building out and rolling out these emerging markets in CCUS and hydrogen, and it is quite constrained as a result of the competition for limited resources. Addressing some of those issues might be beneficial.

Ms Dykta, I just need a two-sentence answer, if that is okay. You made an interesting point about a contingency framework potentially undermining the certainty of the direction of travel that we want to go in by suggesting that we might need to go down an alternative path. How would you respond to someone who would say that given the challenge we face with the climate emergency, we need to take necessary precautions and not have all our eggs in one basket?

You stole my answer—there is not one egg in the basket here. What we have shown in our pathways is that we look at groupings of technologies rather than specific ones. From a system operator perspective, in order to be able to run a resilient energy system, you need low-carbon dispatchable plants—stuff that is not dependent on the weather, which could be CCUS, or hydrogen to power. There are different technologies in there. It is not a case of all our hopes being on one technology and if that does not materialise the whole thing falls apart. There is diversification in both our pathways and the CB7 ones, actually.

Mr Huhne, how can the critical independencies between biomass availability, bioenergy and land use be managed while ensuring that emissions are not offshored?

First, to pick up on what Claire said, the third key bit in terms of contingency is the potential availability of a complete renewable substitute for fossil gas. We can do 120 TWh in the UK, and we can give the Committee a very clear Alder BioInsights study on how to do that. On your question, the Alder BioInsights study, of which we will make sure you have a copy, Chair, shows that you replace a lot of what is currently monoculture—cereal growing—with rotational and sequential cropping, and you have winter cover crops. So you have crops that are designed to break the rotation, so that you are not constantly growing wheat or whatever, and you are attempting to replenish the nutrients in the soil. If you do that, the absolutely key point is that you are not looking at land use as one substitute for another. In other words, “We’re no longer going to grow food. We're going to grow fuel.” That is absolutely wrong. Actually, the fuel can be a complement to the food, and you get an increase in the food yield. We can, for example, show you farmers who have already been introducing these rotations and these sequences as a way of increasing their food yields and getting a crop that is available for energy use. A large part of the 120 TWh that we think can come from biomethane is coming out of the reform of agriculture. The enormous advantage of your Committee, Chair, is that frankly, unlike every other Committee except the Public Accounts Committee, you can range right the way across Whitehall. A lot of these technologies need a number of different Departments to be rowing in the same direction. DEFRA needs to step up to the plate on the reform of agriculture, which accounts for 11% of our carbon emissions. It still does not have a plan for decarbonising agriculture. If it gets a plan for decarbonising agriculture, it is going to have to do the thinking, which we know can be done, about sequencing and rotating crops. If you do that, you get an awful lot of organic matter, which you can use in digesters to provide the back-up for the winter—to provide the diversification—which gives you a really robust contingency on the path to net zero. You also get a major reduction in emissions. Agriculture is now too big to ignore. Every single Government, frankly, has been afraid, and I understand why, of taking on the farmers. Well, I know what Mr Gardiner has done, but every single Government has been afraid of taking on the farmers. You can see what happens in some other countries where that is done. At some point, the farm community has got to see that there is a big opportunity here. There is a big opportunity to actually get not just all the food that they have traditionally been growing, but also to be a key part of our energy security in a net-zero world.

I think this Government might be surprised to discover it had not been accused yet of taking on the farmers, judging by the number of tractors I go past on my way to work. Maybe they are just coming here to tell us how happy they are.

The way the carbon budget works is that the Climate Change Committee’s advice goes into Government, and then the Government take the policy decisions on how they want to deliver that. NESO works really closely with the Government and Ofgem to deliver an energy system that creates the right frameworks. We do not have a direct role in delivering that pathway per se, but the roles that we have—I have mentioned some of them—in the strategic planning of the network, connecting on to the network and the resilience of it are all really important in delivering that. I have done some of the specifics, but I would say the more overarching point is that everything about today’s energy system is designed for the way it looked at privatisation. We need to overhaul the rules, the frameworks, the technologies and how things work. As I say, NESO is the only example of a system operator that looks across the whole energy system, so we are on our front foot in taking that opportunity to overhaul it, but we will need to embrace data, digital technologies, households, businesses and factories, to bring them with us. I look at it as an opportunity rather than a barrier, but the challenge is considerable, I would say.

We should be really clear that there are more projects in the queue than will ever be needed—70% of the projects in the queue will never be built. Because of the first come, first served process we have at the minute, the projects that are at the front of the queue that are speculative hold up everything behind them. Projects that have jobs and money, that are ready to go—shovel ready—are held up by the ones in front. This entire process has been about unblocking that and clearing out the speculative projects from the queue.

We have worked really closely with industry, the regulator and Government to put this reform process in place, and the rules have been consulted on and gone through the industry governance. Everyone in that process is clear on the rules and has been from the start.

Sorry, but I don’t know what you mean.

We are in the throes of implementing the reform now and I have no reason to believe that we are not going to meet our commitments in terms of publishing all of those offers.

It is really difficult to say which ones are most critical. That might be beyond my remit and would be something for the Government to comment on. For many industries, the only way to decarbonise is by capturing the carbon from their process emissions. Low-carbon power does not solve the problem. Anything that emits CO2 as part of its process needs carbon capture and storage. Blue hydrogen is produced from natural gas, coupled with carbon capture. The development of blue hydrogen and the industrial clusters will contribute to increasing the hydrogen production in the near term for the UK, prior to green hydrogen coming on board in the long term, but the cost of green hydrogen and electricity is high. It costs more than fossil fuels at the moment. At the moment, until that cost level comes down, green hydrogen will not come to fruition in the short term. The other thing is that a cluster sequencing process was undertaken. Industry would probably say, “Well, we don’t need a competition,” but it meant that the strongest projects did rise up and did come through. But if all that happens is that two out of the five regions and the five clusters are built, and the infrastructure is there, that is not going to have the impact that is needed in the UK. We need other projects to move to implementation, and we need that pipeline to come forward. It is for the Government to determine the sequencing and the allocation, but there needs to be some clarity, for those projects that entered into the cluster sequencing and did not get track 1 status, as to the likely outcome and what they need to do to get into the next wave of projects that need to come forward. The other thing to mention is around the non-pipeline transport and storage network. The second largest cluster in terms of emissions in South Wales does not have access to a storage facility. Without any non-pipeline transport in place, how are they going to decarbonise? They need some clear visibility and clear lines of sight about how that is to come forward.

If I may just add, non-pipeline transport, particularly on CO2, would be absolutely key to unlocking the early benefits of biomethane expansion, because once you have captured the CO2 in plants up and down the country, you need to truck it to points where it can be injected into a CO2 storage facility. At the moment, a lot of the policymakers thinking about this are thinking about that as an add-on at the end of a process, once you have the actual pipelines up and running. It actually makes sense to reverse the process and do the virtual pipelines—the trucking process—first, so that you can start clocking the benefits of negative emissions. The modelling very clearly shows that the more negative emissions you get into the system, the more you can persist with hard-to-abate technologies and then the more money you save for the system as a whole.

There is a link between not just Government but industry as well. They are also going to want to monitor the progress that is being made for their boards, their shareholders, for investment purposes and for internal KPIs. We have spoken about some of the challenges and the risks around pipelines, and around the shared infrastructure, but these are known and measurable things. We are going to know if a pipeline has been built or a pipeline has been repurposed, or that the injection of CO2 has happened or not happened, or that the transport and storage network has progressed. You can make progress in these things, but there is a need for support and there is a joint effort between industry and Government on how to monitor and progress that.

One of the really frustrating things is that the Government can come around and admit that something is wrong, yet it takes ages to actually get them to do anything about it. For example, the Government have admitted that it is crazy to treat biomethane as not being renewable in the emissions trading scheme. Every European country already does it, because the EU emissions trading scheme already recognises it, and as a result of that you are getting massive growth on the continent, but not in the UK. Yet this is further down the track. A lot of this is about policy certainty and getting Ministers into a position—I know it is not always easy—where they can actually announce something and stick to it.

There are structures in place. The Climate Change Committee has a progress-monitoring role, as does the clean power unit, headed by Chris Stark, that sits within the Department for Energy Security and Net Zero, which is specifically looking at delivery in the next five years. Of course, the next five years provide the foundation for what comes beyond that.

A quick challenge: you did not say, Mr Huhne, how much the transport and storage costs would add to the price of your product. That relates to what Ms Whitehouse was saying about the costs of transport and injection. Isn’t one of the problems at the moment that the costs can increase by up to 25%, and as a result there is not the incentive to actually deliver the CCS that we need?

If I can pull you up on that, Mr Gardiner, there is no doubt that, even including virtual pipeline costs, the CO2 capture from biomethane plants currently costs a fraction of any other rival technology on carbon capture. It is already proven. It is already there, and it is already happening. We have biomethane plants in the UK that are capturing CO2 and trucking it to food users, fizzy drink users and breweries, to be used in food and drink manufacture. There is absolutely no reason why we cannot do exactly the same thing with carbon capture and storage, and that is far cheaper than anything else and ready to roll right now.

Mr Huhne, you have made the case for the expansion of biomass as an energy source. If we were to get the kind of expansion that you envisage and advocate, how likely is it that it would impact on the aviation industry’s intention to have much more biomass within their mix? Is it likely that the two are going to butt up against each other?

You are absolutely right, Chair, that the key constraint we have as a country—as any other northern hemisphere country is going to have—is going to be on the actual amount of organic matter that can be pushed through a biogas plant. We estimate that it is about 120 TWh, and it cannot be used twice. It cannot be used for sustainable aviation fuel, and as a back-up for the electricity generation system, and for home heating. There will have to be a choice, and I would say that the key thing now is low regrets. The one thing I would advise against is locking it into something that is going to have a very long investment timeline, like shipping, where you build a ship that lasts 20 to 25 years. You can put it into HGVs, which will typically be replaced on a six-to-seven-year cycle. That does not block you off from what, in the end, I suspect biomethane is going to be the most useful back-up for in a net zero world, which is for the electricity system, running gensets. So do the low regrets. Expand as quickly as you can with this stuff, because it is incredibly versatile. Do not lock into really long-term uses like shipping. On sustainable aviation fuel, some of it may go there, some of it may go to backing up the electricity system, maybe hydrogen will come in. The market will give you the signals to decide what is the most economical way of doing these things. As long as you have not locked yourself into a long investment timescale, you have the flexibility to allow the market to decide.

It is clear from the number of colleagues who still want to ask questions that we could go on and on with this important area, but we do need to get through two other panels today. Thank you very much indeed, Ms Dykta, Mr Huhne and Ms Whitehouse, for the evidence that we have heard. It has been a very full and detailed session. [1] The correct figure is £298 billion, please see submission SCB0070 for a full explanation.