The beginnings of work on RIIO 2 have rightly become the focus for some much-needed discussion about how the UK can decarbonise its heat industry – which for the majority of domestic customers means gas piped to the property. The gas network is extensive and very reliable – which means it is fundamental not only for domestic heat supply but for industrial use. And although domestic usage is falling (thanks largely to better energy efficiency), that has been replaced by increasing use for electricity supply in the form of fleets of small gas engines.
But with strict – and legally binding – national decarbonisation targets approaching, it is time to get to grips with the problem. The RIIO process, which sets gas network prices and deliverables from 2021, has started to crystallise the issue. Decisions are being taken on investment and Ofgem said in a RIIO document: “the nature of the GDNs’ role in long term heat decarbonisation is uncertain…it is important that the price control enables a transition to decarbonised heat at lowest cost while reducing the risk of stranded investment”.
We have moved on from early assumptions that decarbonisation was a ‘simple’ process of decarbonising electricity and then switching to electric heating.
Gas network owners, naturally, are keen to stress the value in their networks and they have done some excellent work in trialling hydrogen as a replacement for methane as the gas of choice (which would allow the system to be decarbonised at source, using electrolysis or fossil fuel options that include carbon capture). They have made good progress and trajectories are becoming clear that could use 100% hydrogen in some industrial areas and up to 20% hydrogen more widely.
But as some commentators point out, 20% hydrogen (because of its lower energy density) reduces carbon loads by only 6%. Going farther requires wholesale changes to equipment and appliances at every site, domestic and commercial, served by gas.
So is the investment in hydrogen a dead end? No. Hydrogen appears feasible in some areas. Electric heat appears feasible in some areas. It may be that a low carbon obligation on suppliers or carbon tax on users might help sort out the options.
It’s clear that, as New Power discussed in an interview with the Energy Systems Catapult’s Jeff Douglas, the solutions will be local or regional, depending on the area’s characteristics. Crucially, customers will have to understand that their options will vary depending on location.
The answer is not obvious but the next steps are:
- It’s time for large-scale trials – on the order of hundreds of properties – and with a variety of solutions. Some will be hydrogen areas; some will be fully electric with heat pumps, electric vehicles and local renewables (solar or small-scale wind); some will have other mixes.
- It’s time to start looking in detail at different areas and – without being prescriptive at this stage – considering their possible futures. The advent of Local Energy Partnerships can help with this but it is viral at a time when gas networks are considering where to invest overteh next five years
- It’s time to consider the charging regime. It is already being stretched by new options: hydrogen delivers less energy; companies injecting don’t bear the charges of connecting; Ofgem is encouraging gas networks to consider demand side response instead of expanding networks. More will follow.
- Most importantly, it is time to start having the debate in public. It’s a tricky subject. We don’t want consumers and businesses to be unnecessarily threatened with loss of the network. But we do want them to be aware of the debate and to give those making investment decisions some visibility about the future where they are building assets for the long term.
We’ve been mulling this over for two decades and putting it in the ‘too difficult’ pile. New we can and must open up the debate and start large scale testing.
New Power has been following this debate from the start. And with gas networks set to submit business plans this year for period to 2026 it is the perfect time to discuss it at the Future of Utilities summit. I’m delighted to be chairing a session on this topic and I look forward to seeing you there.
Meanwhile read some of New Power Report’s thought leadership, opinion and analysis on the heat issue, via the links below.