Gas decommissioning plan needed in next year

MPs have called for a fully-costed gas network decommissioning plan to be drawn up by government in the next 12 months.

The Public Accounts Committee (PAC) states that early planning is vital to ensuring extra costs of decommissioning are not passed on to the taxpayer.

It adds that lessons must be learned from decommissioning in other sectors such as nuclear, and oil and gas, in its Decarbonising home heating report.

The Department for Energy Security and Net Zero (DESNZ) “should, by end-June 2025, set out how it will undertake any required decommissioning of the gas networks, including how it will be funded”, the report recommends.

“Early planning for any decommissioning of the gas networks, if it is decided that hydrogen has a limited role and electricity becomes the main energy source, is vital to manage costs that we have seen passed to the taxpayer with decommissioning in other sectors, such as nuclear, and oil and gas.”

It adds that in the nuclear sector, taxpayers had to top up the cost of decommissioning seven nuclear stations with £10.7 billion, as existing funds did not keep up with the increased costs.

When asked by the PAC, DESNZ officials accepted “that it needed to increase its work to look at future decommissioning”.

The National Infrastructure Commission has previously estimated that the cost of decommissioning the gas networks will be around £25 billion, while research by the Regulatory Assistance Project (RAP) estimates the physical costs of decommissioning the gas grid at between £21 billion and £132 billion over a period of 25 years, with a central estimate of £76 billion.

Distribution networks have, understandably, been cautioning against jumping the gun when it comes to gas decommissioning.

In its new report on the Future of the gas network, Cadent chief executive Steve Fraser warns that “without the gas distribution network, the journey to net zero will be more difficult and costly”.

He adds: “Deployment of clean energy technologies that require either gas as a feedstock or to provide wider energy system resilience would be slowed.

“Customers would not have the time they need to decarbonise using the clean energy technology most appropriate for their own circumstances.

“And we would make the option of using hydrogen for uses like industry, power and potentially heat, much harder.”

The PAC report also calls for clarity on government’s thinking on hydrogen for home heating.

It adds that “uncertainty for industry to plan and invest on a wider scale could hamper overall progress” to decarbonise the sector.

In particular, the cross-sector group of MPs question whether government will have a sufficient evidence base to make a decision by its self-imposed 2026 deadline.

“DESNZ’s work to test hydrogen for heating has been beset with problems, with key trials cancelled,” the report states.

“Major trials intended to support its decision have been cancelled or delayed due to local opposition and insufficient supply of hydrogen.”

It adds: “Overall, this absence of the evidence needed to support any decision is also creating uncertainty for industry to plan and invest on a wider scale and could hamper overall progress.”

To provide clarity the PAC recommends that DESNZ should set out how it will test hydrogen for different types of properties, including domestic and non-domestic properties, so it can make an informed decision on the role of hydrogen for heating.

Last week, Ofgem director general for infrastructure, Akshay Kaul, told Utility Week Live that the regulator is putting pressure on the government to make a decision on hydrogen for home heating “as quickly as possible”.

He said that taking a decision before the current 2026 deadline would provide clarity for both the gas and electricity sectors on how to plan for the future.

Other conclusions and recommendations made in the report include:

• The cost of buying and running heat pumps is a substantial barrier to take-up for most households, at a time when incomes are already stretched. Recommendation: DESNZ should, by end-January 2025, write to the Committee setting out the findings of its evaluation of heat pump take-up among different socio-economic groups, based on the most recent data. Recommendation 2: DESNZ should, as part of its Treasury Minute response, set out what actions (and accompanying timetable) it will take to address the high running costs of heat pumps.
• There is too much complexity and potential confusion for households to enable them to make informed decisions about installing a heat pump. Recommendation: DESNZ should, as part of its Treasury Minute response, set out how it will make the heat pump landscape easier for consumers to navigate, for example being clear on the impact of insulation on energy bills, by directly comparing heat pump running costs in homes with and without insulation, with this information provided through an easy-to-use website.
• DESNZ faces a huge challenge to make sure there are enough installers to achieve its target to install 600,000 heat pumps per year by 2028. Recommendation: DESNZ should, as part of its Treasury Minute response, set out what actions it will take to increase the number of heat pump installers after 2025.
• DESNZ is not collecting all the information it needs to monitor progress with installing heat pumps. Recommendation: DESNZ should, by end-December 2024 at the latest, develop a mechanism for collecting and monitoring data on heat pump installations across all households in England and publish this data each quarter.
• DESNZ has not yet worked out how it will support households to decarbonise their homes where heat pumps are not a practical solution. Recommendation: DESNZ should, by end-December 2024, outline which types of properties and regions it does not expect to be suitable for a heat pump and what alternative low-carbon technologies are available to them, to make sure that no one is left behind or unfairly penalised in the transition to low-carbon heating.
• Low-carbon heating will increase demand for electricity, but the government’s plans to decarbonise power have been delayed substantially. Recommendation: DESNZ should urgently publish its power decarbonisation plan so that people and businesses can be confident that their investment in low-carbon heating will be supported by reliable and green sources of energy. The plan must be published by DESNZ’s delivery target of mid-2024 i.e. end-June 2024.

A spokesperson for the Great British Gas Distribution Networks added: “The Public Accounts Committee echoes our overall points on the need for both a range of energy options for home heating and the use of a solid evidence base to plan for our transition to net zero.

“This report acknowledges heat pumps are too expensive for many households and impractical for others, which is why we believe some form of ongoing gas will be needed to heat millions of British homes.

“We agree with the Committee that the Government needs more evidence before it can make decisions on electrification, heat networks and hydrogen. We will also need a future energy plan which is clear, costed and on track before any work to decommission our world-class gas network.”