In August 2021, the UK government published its Hydrogen Strategy and a number of consultations on policies to encourage the development of a UK low carbon hydrogen sector (see posts (1) to (4) in this series here). In a sector where countries are competing keenly to be among the first to capitalise significantly on the coming low carbon hydrogen revolution, momentum is crucial, and April 2022 saw the publication of a further batch of hydrogen policy documents, including the government’s responses to the earlier consultations. This is the third in a series of posts on the April 2022 documents (for other posts on these documents, see here).
One of the great unresolved questions of hydrogen policy concerns its potential role in space heating (either as a substitute for methane or blended in the gas grid). In this post, we look at the UK government’s response to its August 2021 consultation on a “grid conversion” hydrogen heating trial.
Trial and trial again
The possibility of replacing natural gas with hydrogen in the gas grid is still at the nascent stage of research, development and testing, as information needed to assess its feasibility, cost and benefits is gathered. As part of this, the UK government has spent £25 million on the Hy4Heat programme which looked into the innovation work on the potential of domestic hydrogen use, and plans a neighbourhood trial by 2023, a village scale trial by 2025 and a potential hydrogen-heated town before the end of the decade. The outcomes of all this research will feed into the decisions which will be made in 2026 on the role of hydrogen for heat decarbonisation and whether to proceed with a hydrogen-heated town. The focus on heat in particular stems from the Department for Business, Energy and Industrial Strategy’s (BEIS) analysis for the UK’s Heat and Buildings Strategy (2021). Heating in buildings currently accounts for around 23% of national carbon emissions, with the vast majority of this fuelled by natural gas.
The possibility of replacing natural gas in the grid is far-reaching – it will affect the existing gas networks down to the appliances in people’s homes which will need to be able to take hydrogen instead of natural gas. This will all need to be offered to the consumer at an attractive rate. There will also need to be infrastructure in place for people who do not want to participate in the trial, raising the question of how the natural gas and hydrogen networks will be separated. The recent Goldman Sachs “Carbonomics” report on hydrogen published in February 2022 estimates that, while hydrogen boilers have high greenhouse gas abatement potential (in comparison to other hydrogen abatement technologies) at circa 46 Gt CO2eq, the cost is also comparatively high at circa 650 US$/tnCO2eq. Further technology advancements will be needed in order to drive this price down.
Despite the challenges, the hope is that the trials will deliver essential evidence on the feasibility, costs, convenience and consumer acceptability of transporting 100% hydrogen safely and securely in the grid and using it in buildings for day-to-day activities. The illustration below, from the UK government’s Hydrogen Investor Roadmap (April 2022) shows how the heat strand fits into wider UK policy on low carbon hydrogen.
The August 2021 consultation sought views on the proposal that legislation is needed to enable the gas networks to successfully deliver a grid conversion trial, building on the “neighbourhood trial” due to take place in Levenmouth, Fife in 2023. The consultation also asked stakeholders whether additional consumer protections are required and how these should be implemented.
To convert from natural gas to hydrogen for a trial, the Gas Distribution Network company (GDN) and its delivery partners will need to carry out works within homes and businesses. There are currently limited grounds on which GDNs have the right to enter private property, and it is expected that GDNs will always aim to reach agreement with occupiers before entering premises unless it is an emergency (as they do currently with homes heated with natural gas). Nevertheless:
- to make premises suitable for heating with hydrogen, it is possible that GDNs will need to carry out some additional alterations which are not needed for natural gas; and
- for any consumers who do not wish to participate in the trial, it will be necessary to move their connection away from natural gas supplies safely.
In the context of consumer protection, consumers in a grid conversion trial area will no longer have the option of using natural gas during the period of the trial. Those consumers will need to either switch to hydrogen supplied through the gas distribution network or to an alternative heating solution offered by the GDN. In these circumstances, additional rights and protections may be required to ensure that consumers have a clear choice and are treated fairly.
Having completed the consultation, the government now intends to proceed with:
- the proposed legislative amendments required to facilitate hydrogen heating grid conversion trials; and
- measures to strengthen consumer protection for those in the trial area.
Primary legislation (to apply only for the purposes of a hydrogen grid conversion trial) is proposed in order to:
- extend the GDNs’ existing powers of entry – anticipated to only ever be used as a last resort to ensure consumer safety;
- make regulations requiring the GDNs to follow specific processes to engage and inform consumers in an appropriate way about the trial; and
- make secondary legislation for the purposes of ensuring that consumers are protected before, during and after the trial – so that, as well as continuing to enjoy the same protections that they have as natural gas consumers (e.g. the ability to switch supplier), they will not be “financially disadvantaged as a result of the…trial…including with respect to the installation and maintenance of either hydrogen heating or an alternative solution”.
The village trial may deliver critical real-world evidence on the practicalities of converting the gas grid and individual properties to hydrogen and using hydrogen for heating and cooking.
Rolling out the blue/green carpet
Of course, the idea of a hydrogen trial is not completely novel and there are some existing projects which have already helped to pave the way.
HyDeploy, run by Cadent and Northern Gas Networks, was the first project in the UK to blend hydrogen into a natural gas network. This was a project with 100 homes and 30 university buildings on a private gas network at Keele University. Up to 20% hydrogen was blended into natural gas networks for a period of 18 months which ended in spring 2021. This blending allowed the customers to keep their existing appliances. Backed by Ofgem’s Network Innovation Competition, the £7 million project was led by Cadent in partnership with Northern Gas Networks and Keele University.
SGN’s H100 Fife project is for a green hydrogen-to-homes heating network on the Fife coast. Taking electricity generated by wind turbines for the production of green hydrogen, this project will then operate through a newly built gas network to 300 opted-in homes. Customers’ appliances will need to be replaced with hydrogen-ready ones, and the project is due to have a four-and-a-half-year duration.
To blend or not to blend
The possibility of hydrogen in the gas network raises a rich range of legal and structural issues. Customer choice, keeping down costs and providing gas blends as requested by customers are all questions to consider, first at the smaller trial scale and then at the national scale. There is also the issue of blending hydrogen into the gas network, to then deblend at the exit point at the different hydrogen-to-natural-gas content that individual customers may require. HyDeploy claims that if hydrogen were blended with natural gas across the UK at a similar level to its project (up to 20%), it could save around 6 million tonnes of carbon dioxide emissions every year – the equivalent of taking 2.5 million cars off the road.
Dentons’ UK Energy team was among the first to highlight some of the commercial and regulatory aspects of a gas grid functioning on a mixture of gases in two earlier articles (here and here). We have advised on low carbon hydrogen projects both in the UK and internationally. If you would like help with evaluating potential opportunities and risks in this exciting, but challenging, new sector, please get in touch.