Energy Security and Net Zero Committee
Oral evidence: Managing the future of UK oil and gas, HC 231
Wednesday 4 November 2026
Ordered by the House of Commons to be published on 4 November 2026.
Members present: Bill Esterson (Chair); Torcuil Crichton; Graeme Downie; Catherine Fookes; Wera Hobhouse.
Questions 194 - 276
Witnesses
I: Dr Angela Needle, Director of Strategy, Cadent; Jenny Phillips, Director of Energy Delivery, National Gas; Charles McAllister, Director, Green Gas Taskforce.
II: Mike Foster, Chief Executive, Energy and Utilities Alliance; Rhea Wolfson, Secretary, GMB Scotland.
Written evidence from witnesses:
– Cadent
– Energy and Utilities Alliance
Witnesses: Dr Angela Needle, Jenny Phillips and Charles McAllister.
Jenny Phillips: Hello. I am Jenny Phillips. I am the Director of Energy Delivery at National Gas. I am responsible for the real-time operation of the gas transmission system in Great Britain.
Dr Needle: Hello, everyone. I am Angela Needle. I am Strategy Director at Cadent. Cadent looks after half of the UK’s gas distribution network.
Charles McAllister: Hello. I am Charles McAllister. I am the Director of the Green Gas Taskforce. The taskforce is a campaign group that represents the 17 largest biomethane generators, shippers and traders, all the GB gas networks, key sector groups and trade associations.
Dr Needle: On domestic gas, clearly we have gas from the North Sea and we have the opportunity to generate biomethane. There is opportunity, while importing gas from overseas, to ensure that we also explore the UK’s resources. I am sure both Jenny and Charles will have fuller answers to these particular questions.
Jenny Phillips: On an annual basis, domestic production accounts for between 40% and 45% of overall demand, with the rest of it coming from Norway, interconnectors from Europe, LNG and GB storage sites. The breakdown is that 50% of that goes to the distribution networks, about 20% goes to power stations, about 20% is exported, about 5% goes into storage and 2% goes to large industrial suppliers. On the volume of gas that is produced domestically daily, around 100 million cubic metres is the maximum capability. In the middle of summer that is sufficient to meet the entire demand in the UK. In winter, when peak demand is about 500 million cubic metres a day, that is about 20% and that is when you are more reliant on the Norwegian, LNG, interconnectors and GB storage, all of which can contribute approximately 20%, plus or minus, depending on what the market is doing and various conditions. It varies across the year how much demand domestic production can meet.
Jenny Phillips: As I have just said, we need gas from elsewhere. We do not have enough indigenous gas to meet demand in the winter.
Jenny Phillips: As a matter of policy, it is important that we can attract gas from overseas, that the market functions, it attracts the LNG boats, which it is doing at the moment, and then where necessary it attracts gas in from interconnectors as well. Historically, that market has been very successful in providing a diversity of supply that has ensured sufficient gas.
Jenny Phillips: The evidence recently from Jackdaw suggests that it would not—but it can increase energy security, which is important.
Charles McAllister: Today there are 140 biomethane plants in GB. There is sufficient capacity in those plants to feed and decarbonise about 1 million homes. What is amazing is that those homes probably don’t even know they are carbonised. We commissioned a piece of work by an expert group called Alder BioInsights to assess the potential for biomethane in the UK. That analysis concluded that there is sufficient sustainable feedstock in the UK to generate 120 TWh of biomethane by 2050. That is more than a tenfold increase on existing capacity. Compared to existing gas demand, it is about 20% but compared to 2050 demand in the NESO central scenario, the holistic transition, we could be in the two thirds share, so it can make a material contribution to our energy security. To give a real example, 1 TWh of gas produced in this country, or biomethane, is the equivalent of one LNG tanker, so 120 TWh of biomethane is 120 LNG tankers equivalent.
Charles McAllister: Very. Not only did the analysis we commissioned conclude this, but NESO commissioned a piece of work, although theirs varied slightly—it said 109 TWh. The reason that is different is our analysis was UK-wide and NESO’s remit is GB only, so it does not include Northern Ireland.
Charles McAllister: One of the things that we can do from biomethane, if we supply it into the market, is biomethane can help to set the marginal price. The good thing about biomethane is that the price is flat as a pancake. There is no variation in the cost. The average cost of producing biomethane in the UK is about £90 per megawatt-hour, with the potential to get the cost down by about 25% if we build bigger plants, unlock some of the co-benefits of biomethane such as digestate—we prefer to call it renewable fertiliser—and also bio-CO2. Biomethane plants produce a really pure stream of CO2 that you can use in industry, the health sector and so on. If you unlock those, it gets the cost down materially.
Charles McAllister: We can get the cost down by 25%.
Charles McAllister: That depends how quickly you can build bigger plants—if the Government were to introduce a future framework, which is a consultation we have been waiting on for quite some time, and introduced a policy that incentivised bigger plants and unlocked the benefits, valorised those feedstocks, it can be as soon as that.
I will add quickly that this Government are obviously very focused on the importance of local jobs and growth all over the country. For oil and gas you have to take a geology-first approach. You go with the geology that makes sense. For biomethane, because the feedstocks vary so broadly from food waste to animal waste, rotational crops or whisky waste, they are spread all over the country. If you spread out the 57,000 jobs that could be delivered if we unlock the sector’s maximum potential, that is about 90 in every single constituency of the UK. They are good, well-paid, skilled jobs, 20% above the national average, in every constituency.
Charles McAllister: Whoever wants them.
Charles McAllister: Correct. It is engineering, plant design, plant management. If any of you would like to come and see a site, there are 140 from the top of Scotland to the south of England. I can help to facilitate that, no problem.
Chair: I am sure a Committee visit is pending.
Charles McAllister: Very good.
Dr Needle: Can I pick up this one, as it is a gas network question? Depending on where the biomethane production happens and where the gas network is in that location, you can put the gas in the network. For there to be space in the network for the biomethane to be added, there needs to be a pull from the network for that demand. We have mapped across our region looking at the capacity of the gas system. In some places there is no need to do what we call reinforcing the gas network to take biomethane and in some places there is a need to do that. It is dependent on location as to whether you would do that or not. The cost to reinforce is not significant, we already do that today, and currently the cost of reinforcement is on the producers to pay for rather than consumers. We can also look at hubs. With smaller biomethane plant opportunities we are looking at, rather than them all connecting individually, which is potentially expensive, them bringing their biomethane in to a central hub where you would then connect. There are lots of different types of solutions to managing good capacity to maximise this, but it is regionally specific.
Charles McAllister: Can I jump in very quickly on that? The reason I say the Green Gas Taskforce has done so well is because the biomethane producers and the gas network are working together to deliver a common result. The gas network is the necessary prerequisite to deliver biomethane at scale, nationally, to a broad range of end users and at least cost. If the gas network was not as expansive or did not exist or if we were not working so closely together, biomethane would have to be transported by other more expensive means. That is key to unlocking it.
Charles McAllister: Biomethane can provide stability to bills, so there is no volatility. That is the key benefit from biomethane today. The natural gas price today is 250p per therm.
Chair: That is three times what it was in January.
Charles McAllister: That is in the same range. We are paying a large amount of money to import gas when we could produce green gas in this country. Point 1, that is a material way to get well-paid, skilled jobs into every constituency. Point 2—another important point—UK content is a key part of maximising the broader benefits to UK plc. For every £1 you invest in biomethane, 85p stays here. That is because we have a really good supply chain that is able to build. We have been campaigning that biomethane is reliable, renewable and it is ready. It is a proven technology and the supply chain can deliver it. Importing it does not give us any of that.
Jenny Phillips: I would just like to take a minute to explain how GB storage works, because it is different from that in Europe. In GB there are known storage sites that are connected to the transmission network. They can fill up from empty in two weeks and they can empty from full in two weeks, give or take a couple of days, but that is not the way they operate. The way they operate is that they sit partly full and respond to what is going on in the market. Today they might be putting gas into the storage sites, but if there is a loss of supply or an increase in demand and the market needs to balance, that gas can stop going into the storage sites and it can turn around within a day. They provide a really important service 365 days a year to the market to provide flexibility, to go up and down as and when the market needs within a day. Having said that, if there is a cold snap coming, we also see that they fill up significantly before that cold snap, so they can either provide the flexibility of service or they can just flow the gas out into the network consistently.
That is really different from the model in Europe, where there are very large storage sites that very slowly fill up over the summer, and we have all been watching them very slowly fill up over the summer. The gas is there in the winter and it can very slowly and stably come out in the countries where the gas storage sites are. It is a different model and it provides an important flexible service to the market in GB.
Jenny Phillips: I have described the way that it operates. It is one of five sources of gas in the UK. We have LNG. The LNG facilities have some storage capability. The boats land, they fill up the storage sites and there is an inherent level of storage there. There is some flexibility in our network and in the transmission networks to do with what we call linepack, the volume of gas that is in the network, which can vary during the day. We can get gas from Norway and interconnectors. When you add up all of those diverse sources of gas, there is sufficient flexibility to deliver the amount of gas that is required for energy security.
Jenny Phillips: I am not going to comment on the cost of gas storage. I am not able to comment on that, but the value that it provides, the flexibility it provides to consumers, basically means you don’t have to get gas from elsewhere. It is of value to consumers. I am just not able to quantify that.
Jenny Phillips: This is where we are looking forward to the Government publishing the outcome of their gas system transition consultation. We are hoping that will set a security supply standard that will define maybe the volume of gas that the Government want to be held onshore in different types of sites for different durations, and the FSRUs could be an important part of that security standard going forward. The options to have gas could include big strategic storage sites, the likes of Rough but not limited to Rough. It could be the FSRUs. They can provide a really flexible service, I believe for about four days, where they can just provide gas into the network. It could be that you have different contracts with interconnectors or you contract for some of the gas in the LNG storage tanks.
All of those are options that it would be good to explore. There are different costs and benefits associated with them but they are all predicated on having a clear articulation of the risk that the Government want to take, what level of security of supply they want to secure, and then the market participants and ourselves would engage in that and try to get to the most effective answer.
Jenny Phillips: It is a really important point that as long as there is that peak level of demand, you have to have the supply infrastructure, the network infrastructure and the right markets to attract the gas to come in and to have the physical capability to move it around. As you say, at least for the next decade that level of peak will be—
Jenny Phillips: That is looking long term as a result of the gas system in transition consultation. It is important to make sure that we do not fall off a cliff. That is a different market mechanism. We already have a standard. For example, for gas transporters, we all have a standard. We have to have a network that is capable of meeting gas demand that you would see once in every 20 years. On a really cold day with really high power generation demand and really high domestic demand, we have to be able to transport gas from wherever it comes in to wherever it is going. We will continue to maintain our networks, receive funding from the regulator to do so efficiently and safely for as long as that network is required. To attract the supply infrastructure, you have to provide different incentives to the market because the risk is that as the overall volume goes down, they do not want to bring the gas in.
Jenny Phillips: It is market mechanisms where the gas comes from, and I do not have a global ability to forecast the price of it. It is important that we set a really clear articulation of risk so the market knows what it is, knows what the requirement is and then you can run a process that gets you the most efficient way to attract those suppliers into GB.
Dr Needle: For the gas distribution network, we receive all our gas via National Gas’s transmission system, supported with biomethane coming in. As long as Jenny and National Gas are happy with the supply, we are content. From a security of supply point of view, we have been given advice that this winter is secure.
Dr Needle: Yes, Jenny.
Graeme Downie: Just the two of you in the room.
Dr Needle: It is just me and Jenny managing the gas. From a security of supply point of view, it is worth saying that as a gas system we regularly run exercises to make sure that we are clear on what would happen should any security of supply issues transpire. We do that annually.
Dr Needle: No, we run an exercise that says, “Today we have a gas outage—what do we do?”. It could be a cyber thing. We run a range of different exercises regularly.
Dr Needle: Cyber is clearly important right now, but all the incidents that you ever look at end up with no gas at some point, so that is the outcome. Whether it is supply shortage or a cyber issue or a security issue or a fault with kit or equipment, that is the outcome. You end up managing that: how do you manage security of supply; how do you manage it so that you are communicating effectively and you are looking after vulnerable customers and managing industry and critical sectors? We have a sector-by-sector plan of what we will do in that instance, so everything matters.
Dr Needle: We have an official hierarchy.
Dr Needle: That is probably best for a separate conversation.
Dr Needle: This is an upstream question.
Charles McAllister: My view is that this country is and has been screaming out for a gas supply plan—that encompasses obviously lots of biomethane, I hope, but outlines clearly where it is coming from and what the plan to procure that is. The UK typically procures LNG on the spot market, so we outbid 43 other countries. Many Government documents have been released on this, which typically say, “We are confident in the ability to meet our energy security, because we are confident we will outbid the other 43 countries to get it”. Will that always be the case? That is a matter for discussion. My argument is that a gas supply plan that maximises the amount of green gas we produce in this country minimises the amount we would have to bid to out-compete other countries on the spot market.
Charles McAllister: One of the things we have been discussing as a sector is whether we could adopt a contract supply for biomethane, fix a price of biomethane in to specific end users or some sort of contract policy or a different style of mechanism to TPC, and whether that is a good way as part of a pragmatic gas supply plan to maximise: unlock more green gas, give greater energy security and so on.
Jenny Phillips: This is where we are actively talking to DESNZ. We are interested in the different models that could come up. One option could be that the Government could decide to buy the gas. They could direct us or the shippers to put it in storage and they would decide when the gas comes out.
Jenny Phillips: Yes, but it is important to know it could be provided from a range of different providers. We have touched on FSRU, LNG and interconnectors. It is understanding what the standard actually is. There will be different ways to achieve that. There might be a demand side response that we can get in there as well. It is important to have a really clear articulation of risk so that we can get the right answer.
Jenny Phillips: My job is to move it around from wherever it comes in. We have the connections and the network that can be used to shift the gas around, so I am agnostic. The more gas, the better, as far as I am concerned.
Dr Needle: To be really clear, there is no impact of having or not having biomethane on the gas distribution network. Biomethane and natural gas are clinically identical, and so one just displaces the other, as would a blend of hydrogen. The gas distribution network is here and the amount of it that we have is about the demand for the gas network.
Dr Needle: I am concerned about the fact that we have a really good and steady incremental growth in biomethane in this country and, as Charles explained, biomethane is more than just a means of generating gas. The production of biomethane on sites in farming communities has a range of growth and commercial benefits to the UK. In addition, it displaces natural gas. Popping it into the gas network, people using greener gas as a means to decarbonise without even knowing it, is an invisibly helpful thing to do. The fact that we have a subsidy scheme that is ending in 2028, although there has been an extension to 2030, means that for those who want to develop biomethane plants—and they take a while to develop because there is planning and all the kinds of things that go with building even small infrastructure—there is uncertainty and there are now projects waiting to put green gases on to the system because of the uncertainty on the subsidy scheme. The subsidy scheme is just £4 on the gas bill.
Chair: Right, so less than a pint of Guinness.
Dr Needle: Less than a cup of coffee at the Doncaster train station when I came in this morning. It seems to be a bit of no-brainer, considering the focus on decarbonisation coupled with energy resilience and growth that you should look to see if we can unlock that sooner rather than later.
Dr Needle: Adding anything on to bills is a problem right now. We know that. It is clear and it is not just for biomethane. It goes for every subsidy across the entire net zero spectrum. You could single out biomethane, but you could do the same for any other subsidy. There are some things that you could play with in the subsidies that make them palatable if you are very worried about adding just £4. For example, in the last regulatory period, the regulator Ofgem added accelerated depreciation into gas bills, which added £10 on to the gas bill. Knowing that we are going to use a lot of the gas distribution network still—and I will come on to answering those questions—it may be premature to do that and that £10 could be used to subsidise biomethane without any changes to bills.
Charles McAllister: When the Government release the future framework we will have clarity on their preferred model to back the sector. As I said, by 2028 it will go up to about £4.80, so again less than an average pint of beer—I checked; it is £5.50. The Green Gas Support Scheme is the existing mechanism. Previously it was the Renewable Heat Incentive. What this sector has shown is that when the Government provide support they will build it, plants will be built. There are 140 plants today. During the end of the RHI 70 were built between 2014 to 2016. The sector responds quickly because the supply chain is there to deliver it, local jobs, boosting our energy security and so on.
Dr Needle: I am not sure that is true. There have been standards set on boilers, if that is what you are referring to, that reduce the NOx emissions significantly. That may be a question for the EUA in the next session.
Dr Needle: I do not have it to hand—it was not a question I was expecting—but we can look at the data and get back to you on that.
Chair: You were not expecting a question? Okay.
Charles McAllister: On how green biomethane is—
Dr Needle: Sorry, we are not responsible for manufacture of boiler equipment as a gas network, but we can see if we can find out the information.
Dr Needle: I did not say that.
Charles McAllister: We will be using methane out to 2050 and beyond. That is not a matter of debate. Every single costed scenario shows that we will. It is a case of volume of demand. It is not a case of whether there is demand; it is a question of where it is coming from. The choice is whether you produce more greener gas here, or import it. That is it.
On the greenness of biomethane, you will not get the Green Gas Support Scheme subsidy unless you can prove your biomethane is at least 70% less carbon-intensive than natural gas. At least. Most of the plants are much further—
Charles McAllister: I have a very good example. Denmark is one of the largest regional per capita producers of biomethane. They have a big pig industry. Danish bacon is not only delicious, but it means 40% of the Danish grid is biomethane, which is incredible. If that waste was left to rot it would release methane into the atmosphere, a very potent greenhouse gas. They collect that, it is cleaned up or upgraded and injected into the gas network, then the remaining digestate—renewable fertiliser—is used on farms in Denmark. It is the exact same model in the UK.
The Green Gas Support Scheme will not give you a penny unless you can prove it is at least 70%. Most of the plants are more than that. The big benefit for biomethane was the subject of a review about GGRs by Alan Whitehead before he was biomethane Minister. Today the bio-CO2 is typically used to make bubbles in drinks such as Irn-Bru. If you use that, combined with carbon capture and storage, then biomethane can be net negative emissions, so a greenhouse gas removal as well.
Dr Needle: Can I add a simpler answer to the question—sorry—which is biomethane makes methane from what you call short cycle carbon emissions. Plants grow, it goes into a digester, it makes methane. Long cycle—which is your fossil fuel—is the methane that has been trapped underground for millions of years. When you burn that, it is additive. When you burn biomethane it is not additive of CO2 into the atmosphere, whereas natural gas is. Hopefully that helps.
Chair: I will come back to that.
Dr Needle: Sure. There is a long road on hydrogen. We do know that hydrogen can be used for industry and power generation. It can be manufactured in the UK. You do have to extract hydrogen from either water or natural gas for it to be useful, so there is a cost to making hydrogen. Can you distribute it and use it for industry power generation? That is proven to be true.
What we know is that NESO’s holistic pathway to net zero has around 100 TWh of hydrogen. The CCC also supports hydrogen for power generation and industry in its carbon budgets. It is not whether I feel we can do it or not; we cannot get to net zero without having some hydrogen in the energy system. That is simply because you still need molecules and gas in the 2050 energy system. You will still have some natural gas, hydrogen and biomethane, and that is because gas supports the electricity system.
In the 2050 net zero system, gas plays a supporting role. It supports the electricity system in back-up, it supports back-up supplies of power generation, district heating, and datacentres that need resilience. There is a big role for gas in 2050 in your net zero world. Some of that will be supported by hydrogen, simply because you can store it for long periods of time. It is a resilience support system.
We absolutely should be still supporting hydrogen. We were quite disappointed—but it is understandable—that the Government have chosen to move the budget that was there to support the first hydrogen transport business model. We are having to pick up the pieces on whether the projects are viable and we are trying to work out what replaces that funding stream. As it currently stands, the continued development of hydrogen in the UK may not get to scale simply because things are being pushed.
Dr Needle: It is more likely that we will end up buying more natural gas at this point in time. There are lots of different ways of making hydrogen but we have significant amounts of curtailed wind in Scotland. Unfortunately, the past hydrogen strategy is a year and a half old—we have not seen the new hydrogen strategy yet and we are still waiting for it—but some guidance that sets out where hydrogen will be made at lowest cost would be helpful. There are ways of making hydrogen at low cost in the UK.
Dr Needle: Excess wind, and then you can sleeve it into the gas network or you can have repurposed or new pipelines to distribute it. I do think we need to look at it again.
Dr Needle: You could do that if you wanted to. The cost of hydrogen right now is quite high, so it would be quite expensive to do so. It has already been proven that you can burn hydrogen in boilers—you can make a boiler; we have seen them and tested that historically. The existing gas network can carry 100% work, and it can carry a 20% blend. It cannot do both things: it cannot carry natural gas and hydrogen. It has to be one or the other.
Dr Needle: Let me explain more about what the gas system does, because it adds helpful context. We need to remind ourselves that the destination we are aiming for is decarbonisation, which is not necessarily, “Electrify absolutely everything”. In your net zero world that you are looking for, according to NESO in the holistic scenario—which is the central pathway that gets to net zero—there will still be around 300 TWh of gas. That is as big as today’s electricity system. We will not have no gas in the net zero future. We will have quite a bit of gas.
NESO’s plan is that you would need roughly a third, a third, a third: natural gas, with carbon capture and storage or offsets—you will still see natural gas for some things—hydrogen and biomethane. The important thing to ask ourselves is, “What will the gas system do? What is it for?” At the moment it does a lot of different things but in your net zero world it will support industry that still need to flame, things such as bricks, glass, steel and primary chemicals. There are a lot of sectors that will struggle to electrify. That is not because they do not want to; it is that the processes cannot. You could offshore these industries, which is kind of happening anyway, but that results in a loss of industrial growth in the UK. We still have a use for industry.
There is also the food sector. As I keep saying to people, roasting, toasting, baking, making all need a flame. There will be sectors that need gas. In addition to that we have the power sector, you will use gas for power generation. In addition to what National Gas provides on the transmission system, we have about 200 gas power stations on the distribution system. We also have 200,000 businesses and 40,000 industries on the gas distribution network. Only 5% of those are in industrial clusters. There will be quite a bit of gas network taking gas to industry and business use. Some businesses may be able to electrify.
Then you have gas for back-up. We have datacentres coming to us for gas supply right now because they want to grow and be able to deliver datacentre services. Datacentres do not want to connect to the gas network; they are doing it because they cannot get the electricity demand. We already have quite a few on the gas network today. They keep a gas connection for back-up, so if their primary electricity fails they have a gas back-up. The same goes for district heating schemes that are primarily gas today, and many with heat pumps are maintaining a gas boiler or a CHP for top-up in the winter or back-up.
I know this is a long-winded way of answering your question, but it is quite important. What we are seeing is what I call a hybrid system. The UK’s energy system will be a hybrid system, where you have electricity doing as much as it can when it is windy and sunny, and when it is not windy and sunny you have the gas system that helps out. If we think of it that way, you will have a gas system—regardless of how much goes to homes—still continuing to be used. On top of that we know heat pump roll-out is going fairly slowly and a proportion of homes or businesses, for whatever reason, may struggle. We expect there to be in 2050 quite a bit of the gas network supporting domestic heating still.
Charles McAllister: I will chuck in three examples. This is obviously biomethane related. Today, there is sufficient capacity in the plant in Scotland to heat and decarbonise the equivalent of 15% of households connected to the gas network—the equivalent of 15% of homes in Scotland heated and decarbonised with biomethane, and they probably do not even know. You need a gas network for that.
In industry, biomethane purchase agreements are becoming increasingly popular with companies that are end users. The Green Gas Taskforce has set up what is called an end users council, which is a collection of 25 businesses that are interested in using biomethane. Some already do. Two examples on that: Future Biogas, one of the companies, have a biomethane purchase agreement with AstraZeneca to decarbonise their facilities; and ENGIE have a biomethane purchase agreement with PepsiCo to decarbonise their facilities. Why do they use biomethane? They both reduced demand and they electrified where it was viable; they both realised they need gas. What gas did they choose? Biomethane. We are in the situation where we have decarbonised vaccines and decarbonised Monster Munch, which I think is a good thing.
The third thing is trucks—HGVs. When I talked about the carbon difference between natural gas versus biomethane, biomethane is at least 70% less carbon-intensive than natural gas, but it is 85% less carbon-intensive than diesel. There are 3,250 biomethane HGVs on the road today. Not the little vans that go around London and other cities—you can electrify those viably—but for the heavy 44 tonne trucks that belt up and down the motorways every day, biomethane is one of the most cost-effective ways to decarbonise.
Jenny Phillips: I think Angie has already touched on that. For moving customers away from their gas boilers there are a range of different solutions, but there are 23 million homes that currently have a gas boiler and rely on that for heat. That will take a finite amount of time to transfer on to alternative sources. Even when they are electrified, if we then go back to the power network, currently the national gas transmission system transports around 2.5 times the energy that the electricity network transports. The amount of investment that has to go into the electricity network is quite significant. It will take time and we have to be able to support that transition.
As that investment happens and the volume of renewables grows, you still need that back-up source of electricity generation in order to provide the electricity to people’s heating. When the wind does not blow, when the sun does not shine, when the batteries have all run out after a couple of days, you still need that back-up. Having gas-fired power stations with carbon capture technology on the back of them, or having new ones that are driven by hydrogen, are gas-driven solutions that will help support the decarbonisation of heating. Whether it is district heating or heat pumps, whatever combination of technology that is, you still need gas there in the background, whether it is bio, hydrogen or carbon dioxide.
Jenny Phillips: They both have a part to play. They provide different services. Up until about 2019 we did have the long-range storage sites. You may have heard of Rough; it has been mentioned a few times. That was one of those storages sites that filled up over the summer and then very reliably provided gas on to the network all throughout the winter. Centrica took the decision—for reasons you could ask them—to close that site, and the economics are not there for the new one or the recommissioning of it. That is why we are looking to the Government to set what that security standard needs to be, and then whether it is Rough or FSIUs or any of the other options, to understand what the most efficient answer is.
Jenny Phillips: All the analysis shows that the transmission system in particular is here for decades to come. As Angie said, the distribution network will be there for years to come. I go back to those 23 million homes that are currently heated by gas. You cannot switch that off without having viable alternative forms of keeping people warm. That is a long-term transition. It will take years and it is important that in the meantime, as that transition happens, we continue to invest in the gas network, continue to make sure that the supplies will come in—whether that is biomethane or elsewhere—to continue to keep people warm.
Jenny Phillips: I can only talk for gas transmission. Our latest price control settlement was £5 billion over five years. If you compare that with the electricity transmission networks, they had £70 billion over the same five years. It is around £12.50 on people’s bills to keep the gas transmission network safe, secure, and available to bring in the gas from whatever sources it comes in through.
Dr Needle: Can I add to that?
Torcuil Crichton: By all means, yes, and then I will ask you a question.
Dr Needle: The challenge is that we talk about electricity and gas systems as if they are rivals, which is not fantastically helpful. What we have today is a gas system that does what it does, and does it very cost effectively—it is significantly less expensive than if you tried to transition the same amount of energy through the electricity system. The electricity system today is not designed to do what the gas system does, so we have to invest in the electricity system to enable that to happen. There are costs of both maintaining the gas system while you need it and getting the electricity system to do what the gas system already does. We are adding costs whichever way you look at this.
Then you may choose to decommission the gas network—or parts of it, because I do not think you would decommission it—which would also add costs. You are right in that we need to think very carefully about the impact of this on affordability. It is good to see that the Government are looking at what they call the gas system in transition, and they are asking questions about cost recovery. Clearly the gas system today has already been invested in; it is here. Your decision to decommission it would be probably the biggest infrastructure decision that the Government have ever made, and once it is gone it cannot be recovered. A very serious—
Dr Needle: It is because they cannot afford to run their businesses in the UK. We seem to be okay—
Dr Needle: It is not to do with the network; it is to do with the cost of energy, or more than that the cost of doing business in the UK. I will give you an example. Encirc, a glass bottle manufacturer in the northwest, has told us that they cannot make their factory electric. They could, but it would have to be four times bigger and need many more people, so the cost of bottles would rise and be unaffordable. They might as well up sticks and move to another country.
This is what is happening: we are offshoring our emissions. The fact that we buy a bottle from another country does not mean it has no carbon. We have to be careful here that we are not pushing for decarbonisation at the risk of a dwindling economy.
Chair: Or pigs?
Charles McAllister: There was a good article from the GMB, who are supportive of biomethane, that said that if Government make the right decision and back cow power, “they deserve a pat on the head”—usual tongue in cheek.
I have a few points to make. First, I cannot see the gas network being decommissioned for the foreseeable future. We will need gas; therefore, we will need a gas network—the end. Secondly, you do not need to decommission the gas network to grow the electricity network. I do not understand why it is pitted as, “Let us grow this instead.” You can grow the electricity network without decommissioning the gas network.
Thirdly, and this is an important point, the number of properties—and that includes businesses as well—connected to the gas network between 2022 and 2025 has gone up. While demand may be declining, the actual number of connections between those two periods went up. We are not seeing mass disconnection away from the distribution gas network. We are not seeing it. Two more quick things—
Charles McAllister: People and businesses still want to connect to the gas network. I will happily write to the Committee and share that evidence with you. NESO released this interesting 10-year forecast. It is not a scenario; it is a forecast based on existing trends and Government policy. What that shows is that home heating gas demand declines by only 4% by 2036—not a material decline. All costed scenarios need gas; therefore, it will always need a gas network.
Torcuil Crichton: Okay, thank you. You guys will be around for some time to come, is what you are now telling me.
Chair: Thank you very much to our first panel for your evidence this morning. We will take a short break while we change over.
Examination of witnesses
Witnesses: Mike Foster and Rhea Wolfson.
Rhea Wolfson: I am Rhea Wolfson. I am GMB Scotland’s Secretary.
Mike Foster: I am Mike Foster. I am Chief Executive of the trade body EUA, Energy Utilities Alliance.
Chair: Thank you both for coming in. Catherine Fookes will start the questioning in this panel please.
Mike Foster: First, thanks for inviting me along to speak today. The evidence session you had has given you an outline of the magnitude of the users of current gas networks: 24 million domestic, 460,000 commercial, and 67,000 industrial connections to the gas network. When we consider what is the fairest way to look at declining and then decommissioning the gas network, the first question that should be asked is, “Will this be the most economic thing to do?”, before we even consider how we would go about decommissioning. If you do go down the route of ultimately wanting to decommission the gas network, the fairest way is clearly to put those costs on the largest possible base of consumers and that would inevitably be with general taxation. You cannot leave it to the last few users of a gas network to pay for the ultimate decommissioning of it.
But before you get to that decommissioning, you have the decline in use of the gas network, if that is the scenario you want to travel down. The current cost for a domestic property is about £122 a year to pay for the gas network. If you halve the number of people connected to the gas network then, all things being equal, you will double the fixed cost that you have to pay as a consumer in your bills, whether through standing charge or onto the unit charge. If you go down to 3 million domestic customers left—which is not an impossible scenario to envisage if the current trajectory continues—that fixed cost could be in the region of £1,000 for having the ability to connect to a gas network and use gas. That is before you even use any.
Clearly there is an unfairness there and all the work that we have looked at is the people who will be left on the gas network in a declining number will be the least well off, because they cannot afford to switch to an alternative; those typically in rented properties because they do not control the appliance, they just pay the bill going along; and it will be those people who are left in what we call hard-to-treat homes, where the alternative to a gas boiler—say a heat pump—is not an economically viable way of heating a home. It becomes expensive to heat a home and hard to treat. Imagine a solid wall construction building. They are typically what we would consider to be hard to treat.
When Rishi Sunak was Prime Minister he estimated that at about 20% of UK households. We think it is probably closer to 40%. It is an enormous number of people who will be left on that gas network because the alternative is unaffordable or they are not in control. Before you get to decommission, you have to manage the decline. You have to consider what is the fairest way of doing that. The people left on the gas network are the ones ideally we should be protecting in our communities, not penalising.
That then leads you to the obvious question: is this the right strategy then, if we leave people on a gas network, to see it reduced? Ultimately as industry—and, as you know from my bio, a recovering politician—I can put it back to you. I have asked myself what I would do in your shoes and my answer is to say, “Would you be willing as politicians to go to a voter, knock on their door, and say, ‘Because we are declining the gas network, we will turn your gas off’”? Ultimately that is what you have to be in a position mentally to do. If you decline the gas network to zero, you have to tell people that they will be cut off. That is heating, hot water, and for 50% of people it is their cooking as well. I do not think you want to go there. My strongest advice to you is, “Don’t go in that direction”.
Mike Foster: Recovery cost was the basis, or general taxation, because that is the broadest possible base by which you pay for these costs. What you have described in your constituency is also borne out in the smart meter roll-out that we have all been embracing and working towards. It has moved from being something everybody will have to being everybody will be offered and so it become voluntary, yet we do not get people taking up the offer of a smart meter. That tail of people left without a smart meter is probably what will be reflected in where they might be with their heating appliances, but magnified, because the smart meter costs are borne through the bills, and people probably do not notice.
If you want to make a switch from a gas boiler to a heat pump, you will notice how much it will cost you to do, and then it becomes a further deterrent to make the shift. There will be those who cannot afford to and those who do not want to who are left on the network and you will not want to cut them off—that is my advice.
Mike Foster: Don’t get me wrong, we are the least complacent organisation when it comes to looking at alternatives on that journey to decarbonisation of homes. Members of mine make heat pumps, boilers, heat interface units for heat networks; they are absolutely engaged in the process towards net zero and decarbonising homes. What they do not necessarily agree with is the route that has been chosen.
I stayed up late last night and got up early this morning to watch the midterm results from the US. Last week President Obama made a comment about endorsing the candidate in Michigan. He said, “We might have disagreed about the means to get there, but we do not disagree with the ends.” We do not disagree with the Government about the ends to get to net zero; we have a disagreement about the means by which they are trying to do it and the direction of travel.
On whether we are looking at the reality of life, there are 24 million homes connected to the gas network and a further 1.5 million homes using oil and LPG. At our current run rate, retrofitting homes with a heat pump is 45,000 a year. That is our best prediction for 2026. It will go to 555 years at that current run rate. We are not putting our head in the sand; we are embracing the reality that we think the gas networks will be here for a lot longer than some people envisage and some people want.
Mike Foster: I have found industry as a whole loves certainty. It always asks politicians for certainty if it is in its interest to have certainty. Where it is against its commercial interests it does not want certainty. On the argument around the Boiler Upgrade Scheme—the cut that was announced in the scheme—yes, it is a cut to the budget of around £800 million over the four years, and for next year it will cap the budget at £400 million, the same as this year. That is equal to about 53,000 heat pump installs. We are currently not getting anywhere close to that number.
On the face of it, it is a cut in the budget and, therefore, the direction of travel that the Government are signalling suggests there is a weakening in resolve towards heat pumps. But the reality for heat pump manufacturers and installers is we are not getting to that capped figure anyway. We can still do more in fitting heat pumps into people’s homes and take up the grant that is available under the Boiler Upgrade Scheme. That scheme is one of the mechanisms; there are other policies supporting heat pumps, and some that frankly are a complete nonsense, such as the Clean Heat Market Mechanism, which penalises UK gas boiler manufacturers if people do not install heat pumps in their homes. That penalty is paid by the manufacturers and put onto the cost of the gas boilers that everybody else buys on a daily basis. Again we have examples of ordinary families being penalised unfairly because of this drive to net zero on a policy that has not delivered a single additional heat pump.
When Government were questioned about the impact of the Clean Heat Market Mechanism they could not point at any additional installs that were a result of it. It is a supply-side measure when what we should be looking at is stimulating demand for heat pumps, not increasing the supply of heat pumps.
Mike Foster: I would certainly have announced the scrapping of the Clean Heat Market Mechanism, aka the boiler tax, because that would have put more money into people’s pockets when they do buy a boiler, and they are typically buying a boiler at a point of distress, when it has broken down. The last thing you want at that stage are higher costs, so I would scrap the Clean Heat Market Mechanism.
I would have suggested—as we have done to Government—that they should consider what we call hybrid heat pumps. That is to say, you have a gas boiler in your home and you add on a heat pump. You have a smaller heat pump unit, it is cheaper, you do not have to get rid of the pipework, you have your gas boiler in place. You do not have to install a hot water tank with a hybrid, but you do with a heat pump-only solution, so the installation costs come down. There is about an 80% carbon saving from a hybrid system compared to a gas boiler. It is not 100%, but it is 80%, and it is a good outcome.
What it also delivers, interestingly, according to studies that were done at the Salford University Energy House—is that it reduces bills. Not only lower than a heat pump, which we knew, but lower than a gas boiler-only solution. As the previous evidence suggested, if you have biomethane coming into your grid at volumes that are far lower than current gas volumes, yes, you can get that remaining 20% decarbonised. A combination of your hybrid boiler, your hybrid heat pump working, and a biomethane solution gives you your 100%. So I would have said to Government, “Rather than £7,500 for a heat pump switch, do £2,500 for a hybrid, get three homes done for the price of one, 2.4 units of decarbonisation rather than one unit of decarbonisation.” But they will not do it.
Rhea Wolfson: There are some similarities that pick up on some of the themes that have already come out: a lack of certainty and national planning means that workers are deeply concerned about their industries in the future for their prospects. We talk a lot about transitioning workers and skills, and a lot of these skills are transferrable. Our members are willing and able to transition skills where required, but the reality is the investment in the workforce is not coming from new industries, and there is certainly a pattern of hostile union engagement and lack of engagement from new emerging industries and technologies.
A big uncertainty comes from the hypothetical nature of these future jobs. We are a gas union: GMB was founded in the Beckton Gas Works and we have always been a proud gas workers’ union. We have thousands of members the length and breadth of the country in all areas of gas, and they have comparatively good wages, terms and conditions, and consistency of contract. This is permanent work, it is a high-density union industry, and it is also an industry that has invested consistently in apprenticeships coming through. There is a question about—
Rhea Wolfson: It is a bit of a hypothetical question, because what type of industries are we actually comparing them to? I cannot answer that question, because what emerging industries are we talking about? When we are talking about transitioning gas workers, where are we transitioning them to? To your initial question about the comparison with offshore workers, some of it is structurally very different, but it is a similar point. It often feels that we are putting the cart before the horse. We are talking about shutting down industries into a hypothetical that does not exist.
GMB and our members absolutely support the decarbonisation. I am personally part of an organisation called Climate Jobs UK, which is a trade union coalition advocating for a jobs-first transition. But that transition has to be real, and it cannot be managed decline dressed up as a transition that does not exist. It has to be a national plan, and that is acutely true of gas, because we are talking about decommissioning, but what does that mean? What are we shutting down in order to build? Until we have a national plan that is realistic that we have to rip up every street in the country to replace pipes with cables, then we do not have a national plan and we certainly do not have a national plan to transition skilled workers.
There is opportunity, we hope. There are transferrable skills across the piece, such as gas workers looking at heat pumps, but there is a lack of national plan and the honesty about how long that transition will take, and a lack of holistic conversation about where gas will sit in the conversation about whether it is industry or power generation and where hydrogen comes in. Until we are having that whole conversation then I think we are in a difficult place.
Rhea Wolfson: It is still a growing industry, but it is certainly something for us to be mindful of. If people exit the industry before there is a replacement for those workers, if we start underinvesting in the workforce and the industry before we are transitioning, we could end up in a very difficult situation. The UK’s gas network is one of the safest and most reliable in the world, and that is based on the fact that skilled workers maintain it. We maintain it in households and networks.
If you create uncertainty in the industry and people exit because they are given opportunities or they feel an uncertainty, then we will end up in a very difficult position with a key part of national infrastructure.
Rhea Wolfson: Lack of training from who, sorry?
Rhea Wolfson: The difficulty is we cannot have a sensible conversation about skills transfer ahead of a sensible conversation about what is the direction of travel for our home heating and industrial heating plan. It comes back to, “What are you transferring me to?”, which is the question of the workforce. Yes, there is a lack of skills infrastructure in transitioning, but of course there will be until we understand what the national plan is for heating our homes and transitioning 24 million households from gas. It is important that we do not have the home heating conversation in isolation, ignoring the industrial landscape here and how important gas is for our industries across the length and breadth of the country.
It is difficult to have a sensible skills conversation, because our members absolutely will support training and skills and we have other things we need to talk about hand in hand with skills—it is not just skills training, it is about no compulsory redundancy agreements, thinking about how we protect the level of pay and pension that people get from the current system. But if you cannot answer the question of where people are transitioning to and where they will apply those skills—and not just in a temporary contract or a hypothetical industry—we cannot have a sensible conversation about skills, can we?
Rhea Wolfson: It depends where they are installing. You cannot just talk about wages; we have to talk about certainty, because we have gas workers who are installing heat pumps, but they are not getting the orders through. It is about the consistency of work. It is pretty difficult to compare and it is probably why you are getting contradictory evidence. We could all probably give you statistics that back up the argument we want to make, but the reality is that it is not a consistent offer of alternative employment at the moment. That is something that fits into the conversation about national planning. That is where we can get things wrong, where there is a severe disconnect from what is actually happening on the shop floor or on the ground in our homes, because we talk about hypothetical jobs, hypothetical heat pump installations, but it is not happening. We have many members who have trained up and can do heat pump installation, but the work is not there.
Mike Foster: The point I wanted to raise at the beginning is this: before we even have conversations around decommissioning and declining, what is the alternative that is out there? How acceptable is that alternative economically and socially to the country? That conversation has not been had. As Rhea said, without that it is very difficult to make the changes that are envisaged.
On the point of heat pump and gas installers that you raised and their relative wages, the numbers can show anything you want. The way that heat pump installations are done compared to a gas boiler replacement is that typically heat pump installs are done by larger companies, compared with a gas boiler replacement that would be done by one-man-band-type operations that exist. Heat pump installation might take five days, and you could swap a combi boiler in a day. In theory you could do five boilers and that would be more profitable than doing one heat pump.
That is why you have this disparity in the numbers, because people all work in slightly different ways across the industry. It is very difficult to get a firm view on whether you are better off being a gas boiler installer or a heat pump installer. The reality is that people are trained to do gas boiler work because that is how they typically go into the industry, because that is where the work is; they are retraining to do heat pump work because they are incentivised to do so. There are heat training grants available, and there is an eye to where the future market might be.
The problem with most installers is that, once they have done their training, there is not the demand out there to put that training into practice. It is a bit like passing your driving test: it is not much good if you then do not have a car to drive in or do any driving afterwards. You become stale and you lose the benefit of all the learning you have done to pass the test in the first place.
Mike Foster: I have no problems with Ofgem as a regulator doing an assessment of what it would cost and the processes that the industry would have to go through to do decommissioning. My challenge back to MCS is what is the motive behind that particular statement? What are you trying to get at in this study? It comes back to what I said before: if you are going down the route of decommissioning, ultimately you as politicians have to be able to say hand on heart that you will cut people off.
Mike Foster: Absolutely.
Mike Foster: It is not necessarily more slowly, Mr Esterson—you do not rule out other technologies that are available. At the moment the rule of thumb is for domestic we will—
Mike Foster: It is an 80% reduction to start with, but then combined with biomethane it will be 100%. You have the same carbon reduction you would do—
Mike Foster: We say that hybrid should be an option that is encouraged, whereas at the moment the Government view on hybrid is, “No, we do not want to encourage hybrids” because they want the heat pump-only solution to work. In theory, yes, a heat pump gives you the 100% decarbonisation that Government are looking for, but if you cannot put a heat pump into your home you are getting no decarbonisation. Whereas a hybrid we think could be a stepping stone to 80%, biomethane gives you 100%. We also think hybrid may give the consumer confidence in how a heat pump operates and works, so that when they come to do the next appliance switch they might consider a heat pump-only option because they have confidence in use of a heat pump. It is a much better stepping stone to a heat pump-only solution.
Our view is that we do not rule out any technology. We want to look at heat networks and how they can decarbonise homes, particularly in communal blocks. Our members make heat interface units to make happen. We also think hydrogen has a role to play. We are not saying it will be rolled out everywhere, but it has a role to play. We think the way forward is not eliminating any technology at this stage, whereas at the moment all eggs are in one basket and that basket is not going anywhere.
Rhea Wolfson: We agree with the position that Mike has put forward, which is that we need not to eliminate any options that are on the table in a mixed economy around energy—biomethane, storage, hydrogen, looking at industrial clusters, a whole number of different options. We are often having a very odd conversation that starts from a place of, “How do we erode a national strategic asset, which is the whole gas network including the workforce?”, without answering the question, “To be replaced by what?”. It is very odd to me to have a conversation about any national strategic asset where the conversation is not, “How do we wind it down in replacement for an alternative?”, when we do not have the alternative established. We are not closed off to any of the options here, nor—
Rhea Wolfson: At the moment, as you say, the statistic is 45,000 installations a year. That is not enough to sustain a transition of a gas workforce.
Mike Foster: No, that is a retrofitted heat pump.
Rhea Wolfson: I do not know the figures of what they are getting.
Mike Foster: I am more than happy to interject there. First, on the heat pump orders and the policy certainty, one thing that the Government have done well is the Future Homes Standard, which is to say that all new build properties should be fitted with a heat pump. That is the policy certainty that helps manufacturers to make those investments that are necessary and supply product to the market. You can see the market growing daily on new build. They are going into people’s properties before they are mandated, which is a good thing.
The problem we have with hybrids is that there is no subsidy at the moment under the Boiler Upgrade Scheme. That is the point I was hoping to make.
Mike Foster: On hybrids we are talking hundreds at the moment.
Chair: Hundreds. That is helpful—thank you.
Mike Foster: Primarily because the—
Chair: Mike, we will put these questions to the Minister. Your evidence is helpful in shaping where we go with the inquiry and our recommendations, so we very much appreciate what you have both said on that mix of technologies. I will go back to Torcuil.
Rhea Wolfson: It is an interesting question and I am often loath to have—I do not want to push back on the premise of all the questions, although I appreciate that is where I am ending up—a conversation that starts with ownership structures rather than what we are trying to deliver. The answer depends on what we are trying to deliver and how effective or ineffective the current structures are in facilitating and feeding into a national plan. It is a political question for politicians more than us.
Torcuil Crichton: It is a political question, yes.
Rhea Wolfson: Absolutely, and I am pleased not to be a politician in this scenario. We are interested in that conversation. Ultimately we have been nervous to have a mass transfer of our members out of the current structures and companies where we have existing union recognition, high levels of density, and ongoing and sometimes successful pay negotiations and structures. But we are open to all conversations about what the future ownership looks like in the whole energy infrastructure.
Privatisation has been a scourge in parts of our energy infrastructure, and enabled profiteering to an extraordinary extent, which has ultimately undermined the ability for the Government to control the cost and had a negative effect on consumers. There is a sensible conversation to be had around that, but it is difficult to have it as one part of a decommissioning or transition conversation.
Mike Foster: My reading of GB Grid was to try to speed up the process of connections to the electricity network, to effectively bring in some competition to the incumbent organisation because that was the bottleneck the Government had identified. We do not necessarily have that same challenge with gas networks, so I do not see where—
Torcuil Crichton: The challenge is the other way; it is bearing the cost of fewer customers.
Mike Foster: If it was GB Gas that was the arm that gas networks were decommissioned, if that is what the suggestion is, we have Ofgem as regulator and DESNZ as a Department, which I think could probably ultimately manage that transition, if that is the direction of travel the Government wanted. I do not think you would have to have an additional body created for that process—not that we have any experience across the world of how to do it, because no one has ever done it.
Mike Foster: Absolutely.
Mike Foster: The running cost is cheaper to start with. That was the point I was making: in the trials that have been conducted, we always assumed that hybrid would be cheaper than a heat pump-only solution, but we found it was cheaper than a gas boiler only solution as well, because of the way it operated. They are also cheaper to install, because you are using your heat pump, first, it is smaller, the hybrid add-on—
Mike Foster: Because they are still more expensive than a gas boiler switch. If a consumer has a choice of, “Do I want £2,500 to swap my combi boiler with another combi boiler, or £13,000 for a heat pump, or £7,000 for a hybrid?”, what will the consumer choose?
Chair: Thank you for clearing that up. Thank you both for coming in and for your evidence. If there is anything you would like to add, please write to us. We will put your points to the Minister at a ministerial session soon. That is the end of our session.