Networks call for £900m investment in green gas

The five gas network operators in Great Britain – Cadent, National Grid, Northern Gas Networks, SGN and Wales and West Utilities – have put forward joint plans to invest more than £900 million over the next five years to “lay the foundations for the world’s first zero carbon gas grid”.

The companies have urged the government to give its support to the proposals as part of its economic response to the coronavirus crisis. The spending would fall under the RIIO2 price controls, beginning in April 2021 for gas networks.

Most of the money – £446 million – would go towards the development of new networks required for the delivery of hydrogen to homes and businesses. The vast majority of this – £391 million – would be invested in carbon capture and storage networks required to decarbonise the extraction of “blue hydrogen” from methane and enable the creation of low and zero carbon industrial clusters.

Around £150 million would be spent on repurposing existing gas networks to run on hydrogen, including running large-scale trials in homes. Furthermore, £44 million would be spent on blending hydrogen with natural gas, whilst £150 million would be allocated to “cross-cutting” projects to reform the way gas networks are operated and enable new sources of gas, both hydrogen and biomethane, to be connected up.

The networks envision most of the funding coming through the RIIO reopener mechanism, whereby Ofgem can increase their spending allowances mid-way through their price control. They are also seeking £108 million through the Network Innovation Competition and £75 million through the Network Innovation Allowance, bringing the overall total to £904 million.

Alongside the announcement, the Energy Networks Association released a new report claiming that the £182 billion of investment required to decarbonise gas networks could be paid back through benefits to consumers by 2045 and go on to deliver £89 billion of additional benefits by the middle of the century.

The report predicted that both blue and green hydrogen – the latter being produced by passing renewable electricity through water – will become cheaper than natural gas (plus the carbon price) well before 2040.

It forecast that green hydrogen produced only using surplus renewable electricity will become cost competitive with natural gas in 2030. Blue hydrogen will reach this tipping point shortly before 2035 and green hydrogen produced using dedicated renewables shortly afterwards.

ENA chief executive David Smith said: “With the solutions to tackling climate change being as much local as they are national, we have to take the #buildbackbetter opportunity to rebalance our economy in the right way.

“As the government looks to set out its plans for the economic recovery from the Covid-19 crisis, our members are ready to play their part. We have a plan that’s ready to go so let’s unlock the investment that’s needed and create the world’s first zero carbon gas grid here in the UK.”

“The need for action from government has never been greater,” said Chris Train, former Cadent chief executive and now champion of the ENA’s Gas Goes Green initiative.

“Investing in the infrastructure that will ensure that homes and businesses across the country are connected to the world’s first zero carbon gas grid is the one of the best ways of not only meeting our decarbonisation targets, but also for ensuring that our economic recovery from the COVID-19 crisis is first and foremost a clean, green one.

“Unlocking this investment is a huge opportunity for Britain to lead the way in the fight against climate change.”