BEIS hedges its bets on heat

The publication of the Hydrogen Strategy provided some glimpses of the government’s approach towards decarbonisation of heat but, as David Blackman discovers, its key proposals seem to have provided more questions than answers.

While some of his Cabinet colleagues were notoriously holed up at holiday resorts, Kwasi Kwarteng spent August making up for lost time.

The business, energy and industrial strategy (BEIS) secretary had been keen to publish the government’s long-awaited Hydrogen Strategy before Parliament rose for its summer recess but was unable to do so.

However, rather than waiting for MPs and peers to reconvene in September, the strategy and an accompanying suite of documents were pushed out in mid-August.

Julie Cox, senior policy advisor on gas for Energy UK, says it is unusual for such a heavyweight policy to be published during a recess.

“It shows the government realised it needed to get the strategy out,” she says.

Kwarteng’s impatience is understandable: the hydrogen document is a cornerstone of the wider energy strategy that is taking shape in the run up to the COP26 climate change summit, which kicks off in just under two months.

“It’s another step towards clearing the path to COP26 that the government can point to,” says Mike Foster, chief executive of the Energy and Utilities Alliance.

The strategy lays some of the groundwork for developing a UK hydrogen production industry, the centrepiece of which looks set to be a Contracts for Difference (CfD) style mechanism to stimulate the sector.

But the strategy is less clear on the demand side. It projects that consumption of hydrogen for heating could be anywhere between 0 and 45 terawatt hours (TWh) per annum by 2030.

The key decision for utilities, whether hydrogen will be used for domestic heating, is not due to be made until 2026, according to the strategy.

This timetable is designed to allow time for various trials to be carried out on whether the fuel is safe to use in homes.

While the government mulls over whether hydrogen should be given the green light for home heating, it has set a target of 600,000 heat pump installations per annum by 2028.

These differing timetables give electrification a “head start” in heating, says Anise Ganbold, global energy markets lead at consultancy Aurora Energy Research.

Potential investors in hydrogen may hold off doing so in order to establish whether the incentives prove attractive, she adds.

Dr Angie Needle, director of strategy at Cadent, says the 2026 timetable is “too slow” and that uncertainty over the future of heating will make managing the evolution of the gas network more difficult.

Conversion of the gas grid could happen rapidly though once the go-ahead for hydrogen has been given, says Gus McIntosh, director energy futures of gas network SGN.

“We can go very fast once we make the decision,” he says, pointing out that the industry’s ongoing programme to replaces its iron mains with plastic pipes by 2032 puts the gas grid on track to be hydrogen compatible.

Replacing the transmission network will only make up about a tenth of the total cost of transforming the gas system to hydrogen, dwarfed by those relating to producing the fuel, he adds.

Kicking the can down the road

The contrasting paces the government is adopting towards hydrogen and electrified heat reflects the relative maturities of the technologies, argues Dr Richard Lowes, senior associate at The Regulatory Assistance Project.

“You can’t help but feel that decisions are being put off because hydrogen is such a long way away,” he says.

Pointing out that that it already makes sense to fit off-gas grid and new build homes with heat pumps because they are not already connected, Lowes says: “Whatever happens we know we are going to need a lot more heat pumps.”

Nevertheless, efforts to decarbonise heat could be set back by the lack of clarity on policy in the area, says Ganbold. “It’s kicking the can quite far down the road because people need to invest now in the right technology. It’s disappointing that they are going to delay the decision for four or five years.”

Tim Lord, senior fellow at the Tony Blair Institute and former director of clean growth at the BEIS department, agrees.

“If your strategic plan is to principally decarbonise heat through electricity, the clearer the market signal you send the more scale investment you will see and the more rapidly you will see costs come down.

“The worst of all worlds is that by government hedging its bets on all technologies and not sending signals to the market, you won’t see the cost reductions we need to see in heating.”

While acknowledging that hydrogen may play some role in heating, Lord is unconvinced that it can do the heavy lifting in the UK’s homes.

Arguing that hydrogen production will be limited until the 2060s, he says the government should focus the use of the scarce resource on areas where it can most effectively be deployed.

“The evidence suggests that home heating is not the most effective place for it to be used.”

Noting the Climate Change Committee (CCC)’s analysis that the most valuable role for hydrogen will be in hard to decarbonise areas area such as heavy industry, Lowes says: “There is a role for hydrogen in the energy system but it’s the champagne and not the water. It’s inefficient and expensive so why would you use that for the bread and butter.”

Hydrogen-ready boilers ‘are no regret’

The clearest signal on heat contained in the paper was the strategy’s announcement that the government is working towards a 2026 timetable for making all new boilers hydrogen compatible.

Needle expresses frustration that the mooted timetable for hydrogen-ready boilers is not swifter.

She says: “Waiting makes no sense. Even if the boiler never sees hydrogen, it’s a complete no regrets: I don’t know why you would wait.”

But the industry needs time and money to switch over its production lines to manufacturing hydrogen-ready devices, says Foster: “We need to give manufacturers time to retool. It’s not something that can be done overnight.”

Noting that manufacturers have committed that customers won’t have to pay any extra for a hydrogen-ready boiler, Foster adds: “The consumer won’t pay any additional amount and over time at a replacement rate of 1.6 million boilers (per annum) by 2040, you could replace pretty much the whole housing stock of natural gas boilers with hydrogen-ready boilers. This gives maximum flexibility for policymakers to choose what route they want.

“It’s a smart way of making the transition.”

Dr Keith MacLean OBE of Providence Policy agrees, saying: “Hydrogen-ready boilers is literally a no regrets option.

“For on-grid areas, keeping options open with hydrogen-ready boilers is an absolute no brainer.”

But Ganbold is concerned that while the boilers themselves may be hydrogen ready, it will take several years for the grid to catch up.

During the intervening period they will still be running on gas, she says: “It’s pushing the decarbonisation of heating even further back because you will then have to wait for the entire gas supply to be hydrogen as well.”

Blue vs green

The government has not allayed these fears over the sustainability of hydrogen by saying in the strategy that it wants to pursue the development of both so called “green” and “blue” hydrogen.

Green hydrogen is made using electrolysers to release hydrogen from water. Blue hydrogen meanwhile is produced from natural gas with released emissions trapped with (CCS) carbon capture and storage technology.

The Hydrogen Strategy says the two versions of the fuel may hit production cost parity as soon as 2025.

The government’s decision to ride both the green and blue horses has proved controversial, triggering the resignation of the chair of the UK Hydrogen and Fuel Cell Association Chris Jackson.

He has subsequently gone public with accusations that the government has caved into pressure from fossil fuel companies, which view blue hydrogen as a way of staying in business.

Dr David Joffe, head of carbon budgets at the CCC, recently told Utility Week that blue hydrogen should be treated as a “supply of last resort”.

But MacLean defends the government’s move, even though it threatens to put the UK out of kilter with the EU’s recent decision to put its eggs in the green hydrogen basket.

He says: “The twin-track approach makes sense, to make early steps with cheaper blue hydrogen, still makes big steps forward in carbon reduction.

“It may not be optimal but it’s not bad as long as it’s done with CCS.”

The government should have bitten the bullet and opted for a green hydrogen-only approach, says Lowes: “We know it (blue hydrogen) is limited in terms of its long-term prospects and is reliant on fossil fuel gases.”

If blue hydrogen is to be used, Lowes says its production must be tightly regulated in order to prevent leakages as much as possible.

Pointing to recent US research, Lord says the risk of escaping methane emissions must be taken seriously and the full cost of capturing them taken into account when considering the economics of blue hydrogen projects.

While it makes sense to explore blue hydrogen in order to learn more about how to produce the fuel, the government should tread warily, Lord says: “We need to be careful not to overcommit on blue hydrogen.”

• Discover the practical next steps for a hydrogen rollout at the Utility Week Hydrogen Forum, 17 November 2021. Click here to find out more.