Next government urged to ditch gas ‘supply fixation’

The next government must move away from the UK’s gas “supply fixation” and establish a “gas transition plan” within its first 100 days in office.

That is according to the UK Energy Research Centre (UKERC), which also calls for more focus on local energy plans, greater investment in electricity networks and a “bold, well-articulated policy” for heating.

The policy calls are made within the UKERC’s Review of Energy Policy 2023, which largely focusses on challenges facing the next government following this year’s anticipated general election.

The report criticises gas-related policy decisions taken in 2023, including the Energy Security and Net-Zero Growth Plans plus the promise in the King’s Speech to grant new oil and gas licenses every year.

UKERC says these decisions “demonstrate [a] security of supply fixation” which should be viewed as “yesterday’s problem, not tomorrow’s challenge”.

Instead, UKERC claims there is an “urgent need to develop a gas transition plan that moves beyond the emphasis on security of supply, towards managing uncertainty around the reduction in gas demand as we transition to low carbon energy, whilst also ensuring resilience and affordability”.

“The Government is right to ‘kick the tyres’ to check that our infrastructure remains in good order, but the greatest challenge to future gas affordability is not security of supply, but security of demand,” the report states.

“The government’s Energy Security Plan […] recognises that the transition to clean energy could create uncertainty in the gas market and it promises to act decisively to mitigate this risk. But its current plan does not explore the nature of the risk nor how it might be mitigated.”

It adds: “The key challenge for any government going forward is how to manage the uncertainty over the falling demand for natural gas in terms of its impact on the economic and technical viability of the various elements of the gas infrastructure that is in private hands.”

The report also touches on the future of home heating, adding that a “new government [must] provide clarity on the most appropriate home heating systems, while also providing finance for customers to insulate their homes”.

It adds that the National Infrastructure Commissions recent recommendation to entirely rule out hydrogen for home heating would have “significant implications for future gas demand and for the gas network”.

It adds: “The NIC promises a report soon on decommissioning of the gas network, some of which might be repurposed to transport hydrogen to industrial clusters. However, the challenge is how to keep the current system in place while there remains significant but falling gas demand.

“Failure to manage this will undermine the resilience of the system and threaten gas security.

“In sum, what is required is not a security of gas supply plan, but a gas transition plan. Fortunately, this is now well understood by DESNZ, and it will undoubtedly be an issue for the Future Energy System Operator to address.

“However, the recent statements by Prime Minister Sunak rolling back some of the net zero targets and drilling for more oil and gas only serve to add confusion. A future government must get over this fixation with security of supply and come up with a coherent plan to manage gas in transition to ensure security and affordability.”

Figures published by Ofgem last month show that consumers could face bill hikes of up to £43 a year from 2026 to fund the future decommissioning of the gas network.

The scenario is mooted in a consultation on Ofgem’s methodology for the RIIO3 price controls for gas and electricity transmission networks, which warns that failing to begin smoothing out the costs now could increase the burden on those customers remaining on gas in the future.

Government is due to make a decision on the future role of hydrogen in home heating in 2026, but many saw last year’s decisions to scrap the village trials and increase heat pump grants as indicators that government is growing cold on the prospect of hydrogen for home heating.