Repurposing gas network poses ‘significant’ challenges

Repurposing the gas distribution network to carry hydrogen poses “significant” technical challenges and costs, Ofgem has warned.

In its response to the National Infrastructure Assessment (NIA), which was published in October 2017, the energy regulator outlines the challenges and costs involved in decarbonising the heat network by reducing use of natural gas.

Ofgem says retrofitting the network involves “significant” technical challenges, citing as two examples the replacement of existing iron mains and many household appliances.

It also says there are questions over safety, whether customers will accept hydrogen and the best way to produce the gas.

The regulator flags up barriers to other decarbonisation options such as the high capital costs involved in electrifying existing heating systems.

In that network companies will have a “central role” in decarbonisation of heat and, while policy choices are a matter for government, heed must be paid to customers’ interests, the regulator indicated.

“The consumer’s voice and interests need to be fully represented in the decision-making process to avoid consumers overpaying for decarbonisation.”

The response also warns that energy suppliers face conflict of interest challenges because of their involvement in installing energy efficiency measures and smart meters.

“Suppliers’ role may also lead to a less cost-effective or efficient implementation of decarbonisation,” says the response.

And it questions whether the property-by-property basis installation of energy efficiency measures by supplier is the most efficient way to roll out the upgrade of building stock.

Savings could be achieved by installing measures across an entire street or neighbourhood at the same time, it suggests.

“Suppliers in a competitive market are not well placed to deliver this, but other parties such as local authorities or development banks might be able to play a greater role.”

It says a property by property basis for energy efficiency upgrades also disincentivises tenants from carrying out works because the benefits will accrue to the landlord long term.

And the regulator defends the Contracts for Difference subsidy regime, which the Helm review recommended scrapping, because it provides certainty of revenues to investors in such projects.

The NIA was drawn up by the National Infrastructure Commission to help shape its advice to government about the UK’s infrastructure provision.