Written evidence submitted by the Energy Networks Association (DHH0021)

Energy Networks Association represents the companies that operate and maintain the gas and electricity grid network in the UK and Ireland. Serving over 30 million customers, they are responsible for the transmission and distribution network of “wires and pipes” that keep our lights on, our homes warm and our businesses running.

Background

ENA members believe that if our power, heat, transport, waste and industrial sectors are all interdependent, then so must the solutions for their decarbonisation. Solutions will be driven locally as well as nationally. There are a number of areas in which industry and government can focus on with the right regulatory support to accelerate economic recovery and a carbon neutral future and we are working with Ofgem and the government to support this. 

The scale of the challenge ahead is vast. The networks are looking to the future and the ‘difficult to reach’ sectors including heating - which we need to decarbonise to fulfil our Net Zero obligations. We are ready to provide the digitalised backbone to the national uptake of electric vehicles, a fully flexible energy system and decarbonisation of heating systems.

There will need to be significantly more investment in the low voltage network which will be the primary enabler of the increase of electric vehicles and heat pumps.

Furthermore, through Energy Networks Association’s Gas Goes Green programme, Britain’s gas network companies have made clear their commitment to creating the world’s first zero carbon gas grid, here in the UK, and to delivering the innovation projects needed to tackle the operational and technical challenges associated with the deployment of hydrogen and biomethane.

The UK has the opportunity to create the world’s first zero carbon gas grid. However, other countries (e.g. Germany and Australia) are already pushing ahead, so there is a significant cost of inaction. Establishing a world leading hydrogen economy in the UK could deliver:

 

As companies investing in this sector, we are ready to move ahead with c£1bn of investments, including a series of ‘shovel ready’ projects right across the UK to help start to deliver the benefits across the country.

As regulated monopolies, which are publicly and directly accountable to the energy regulator Ofgem, Government and Parliament through a price control system, energy networks act as an important lever of public policy. With the right long-term policy and regulatory frameworks, the network companies can continue to perform this important role.

ENA would welcome the opportunity to give evidence to the Committee or support the Committee in sourcing expertise from our membership.

 

  1. Please refer to our members’ submissions for details on this question.

 

 

  1. Energy efficiency must be central to any coherent policy around heat and cooling, well insulted buildings require less energy to heat or cool and that makes the scale of all the other issues around heating and cooling smaller.

 

  1. It is important that a low-regrets and cost-effective transition to low carbon heating happens promptly in order to start addressing 2050 targets. A clear policy is key to deliver the change.

 

  1. We believe that, for heating policy to be effective, it is crucial for it to be a part of a coherent energy policy framework that optimises the UK energy system as a whole – addressing the synergies between, and the issues faced by, transport, heat, and power sectors alike; and not in isolation.

 

  1. Tightening the building standards for energy efficiency to meet the standards of zero carbon buildings (or above) is a vital action for driving the decarbonisation of heat. The UK offers significant potential to increase the building energy efficiency standards for both new build and existing properties.

 

  1. Heat policy needs to deliver a positive social impact. There is a high likelihood of a price increase for the most commonly used fuels as a result of any fiscal changes which could create negative externalities for the fuel poor and vulnerable consumers. There is scope to introduce support mechanisms to ensure fairness and to avoid adverse impacts for these customers as a perverse outcome of achieving heat decarbonisation objectives.

 

  1. ENA is of the view that the Government should not predetermine which low carbon heating provision should be deployed in new housing developments. Rather than a blanket policy we believe BEIS should set out a range of appropriate options, recognising that further net zero compliant solutions may emerge over the next thirty years, and technology costs and consumer preferences are likely to change over that time.

 

  1. Giving a clear steer on green gas is vital. This would include mandating hydrogen-ready boilers by 2025 and announcing the sites of first CCUS projects receiving the £800m announced in the Budget which would significantly accelerate deployment of private capital into those projects and associated jobs and growth.

 

  1. As mentioned above, ENA does not advocate for a specific technology. The future of heat will be much more diverse than it is now, with heat networks, hydrogen and heat-pumps as well as hybrid solutions working alongside one-another.
  2. Given hydrogen’s potential to accelerate decarbonisation across multiple sectors, a cross-cutting vision and strategy for a hydrogen economy will be required from the government, with production and use starting from the early 2020s.
  3. Hydrogen has the ability to have a significant impact across multiple sectors; transport, industry, power generation and domestic heat. Creating greater support for hydrogen in the UK, such as implementing a hydrogen strategy and by mandating hydrogen replacements for old gas boilers, will help establish a world-leading hydrogen economy which could deliver several hundred thousand jobs and around £176bn of private sector investment right across the country.
  4. Likewise, heat pumps provide a viable option for decarbonising heat provided that the underlying electricity that is powering the heat pump is decarbonised. BEIS’ Clean Growth – Transforming Heating, Overview of Current Evidence document recognised that electricity presented the greatest opportunity in decarbonising properties off the gas grid. This makes it clear that there is no single answer for decarbonising heat, and the associated costs need careful consideration.
  5. If paired with thermal or electrical storage, including hot water tanks, heat pumps can provide a significant amount of flexibility, which in turn could be used by local DNOs or National Grid ESO. In turn this could help reduce the socialised costs of electricity networks and facilitate alignment of heating usage requirements with the availability of zero carbon electricity generation. This local storage could also help reduce the need for system-wide electrical storage or the over-provision of generation capacity.
  6. The partial electrification of heat is anticipated to be one of the main reasons for a forecast doubling of peak electricity consumption by 2050. Electricity networks are primed to deliver a smart-charging system which, based on the National Grid Future Energy Scenarios from 2018, with 20% of flexibility could reduce the new investment in electricity generation by 20% and with 40% of flexibility could reduce the cost of reinforcing the network by 36% - around £6bn.
  7. Further details can be found in Annex A.
  1. As mentioned above, we believe that a clear signal from the Government is key for the industry, supply chains, skills to develop and progress accordingly. We hope that the Government’s proposed policy roadmap, coupled with an overarching target and holistic system approach will deliver that.
  2. In tracking the update of low-carbon technology (LCT) through time we note it is highly sensitive to the Government’s stimuli and also depends on the market’s ability to find profitable business models:
  3. It is likely that Local Authorities will need to have a role in facilitating the transition. This could take shape in the form of local solutions, or more ambitious local targets, as well as co-ordination of local stakeholders to achieve the carbon targets. The policy for heat decarbonisation needs to recognise the Local Authorities aiming to achieve net zero target ahead of 2050.
  4. In the light of COVID-19 pandemic, affordability has been an ever-increasing focus of discussions with stakeholders. Any proposed heat and decarbonisation policy needs to deliver a positive social impact and be coupled with support mechanisms should be provided to avoid disadvantaging customers who are vulnerable or on low income.

 

  1. This is especially important when the cost of decarbonisation is considered. Disincentives for a continued use of a fuel or technology are only effective if there is a scheme in place to support and facilitate the adoption of new technology, and enough information available to installers and customers.

 

  1. Tightening the building standards for energy efficiency to meet the standards of zero carbon buildings or above is a vital action for driving the decarbonisation of heat.

 

  1. In order to deliver the low carbon economy of the future we will need to ensure that the technologies that have been developed and are being delivered can work cohesively. ‘Full systems’ end-to-end testing of the green economy in a region or island of the UK would achieve this.

 

  1. Possibly centring around one of the low carbon industrial clusters being deliberated by Government, this would provide an opportunity to test the integration of flexible generation, hydrogen, electric vehicles and high-volumes of renewables as well as other technologies, all connected by a smart, data-driven grid.

 

  1. Whilst trials of this nature take a long-time to coalesce, the early stage, high-skill developmental work could begin now, creating opportunities for the engineers, system designers, planners and multitude of other people a project of this scale needs.

 

  1. Government support through match-funding would enable the investment of significant volumes of private capital. Central coordination from the Energy Systems Catapult could similar enable the cohesive, cross-industry collaboration needed from the multitude of parties involved to take this big step towards a net zero economy.

 

 

  1. The cost of providing network infrastructure is already spread fairly across customers through the RIIO price control framework, accounting for vulnerability in all its definitions.

 

  1. As we move into RIIO-2 with Final Determinations made at the end of the year it will be critical for Ofgem to ensure that the new price control period enables the building of the strategic network infrastructure required to meet net zero. Making the right investments, in the right places at the right time will be essential to meeting net zero in as cost effective way as is possible, mitigating the risk of intergenerational borrowing, allowing network companies to socialise the cost of investments over as long a period as is possible. Furthermore, it represents a critical component in a green recovery, supporting the economy and creating jobs, while at the same time minimising the risk of stranded assets.

 

  1. Without a coordinated and strategic approach to the significant challenge of the decarbonisation of heating, it is likely that decisions will be made on a piecemeal and short-term basis leading to sub-optimal outcomes for consumers and increasing the risk of not meeting the net zero target.

 

  1. The need to consider a wide range of technologies and match these to different housing stocks over a 30-year time horizon, during a period of dynamic change requires a centrally driven approach, delivered via a binding and powerful mechanism. While the details of a Net Zero Heating Obligation (NZHO) would need to be refined, we think it could comprise the following elements;

 

  1. Such a market mechanism, could well provide the long-term certainty that private capital needs to invest, meaning that taxpayers would not need to finance the assets and infrastructure. It is also likely that the market confidence that comes from long term government commitments would subsequently lead to investment in the wider low carbon heating supply chain which would benefit UK jobs, industry and the wider economy.

 

  1. Further work needs to be done in particular who the obligation could be placed on out of the energy networks, energy suppliers or regional authorities. We have carried out analysis into these options and are keen to engage with the Committee on this and the design of an NZHO more broadly.

 

 

  1. Please refer to our members’ submissions for details on this question.

 

  1. Detailed local plans and coordination in conjunction with local authorities, utilities and community groups would help identify the priority decarbonisation needs, enabling the co-designing of plans for network investment. We believe this should go beyond the long-term targets outlined in the government’s current Road to Zero strategy.
  2. However, clarity is required on the scope and BEIS and/or Ofgem’s definition of Local Area Energy Plans, production timescales and the funding of to produce these plans. At present, local authorities are resource constrained.
  3. National policy decisions will, to great extent, dictate the approach Local Authorities (LA) will be taking to decarbonisation. Both funding for LAs and policy interventions are predominantly designed at the national level. To enable the development of Local Area Energy Plans, decarbonisation policy should be technology agnostic (be applicable to both hydrogen and electricity solutions) to facilitate regional heterogeneity.
  4. These market changes will also require a ramping-up of customer service support as, along with the decarbonisation of transport, customers’ contact points with network companies exponentially increase.
  5. Safety must be at the core of this shift. The networks are ready to bring forward the changes necessary to gas standards and safety regulations in an evidence-based manner to ensure the safety of our customers is maintained as we transition to a zero-carbon gas grid.
  1. Setting clear policy intent and the right incentive framework for low carbon heating systems will help increase consumer confidence in adopting these measures whilst also creating the market signals needed to drive innovation and investment. This will allow networks to unlock investment to facilitate electrification and use of alternative gases in heating.
  2. In a report by Imperial College London for the CCC, it is stated that the cost and disruptiveness of electricity distribution network reinforcement can be minimised if investments are future-proofed. However, the current price control framework “does not cover the required multi-decade time horizon”.
  3. As detailed above, there is an opportunity for the UK Government’s 2020 Heat Roadmap to embrace innovation. More must be invested in trials – from heat pumps to hydrogen and hybrid heating systems – driving UK research and development. The Government and Energy Systems Catapult can play a critical role in driving this innovation.


Annex A

  1. Hybrid heating systems are vital from an overall system cost perspective and support for them should continue. This view is shared by CCC who say, “Hybrid heat pumps should be eligible under future schemes (unlike proposals in the recent BEIS consultation)[1].” In our Pathways to Net Zero report, which sets out a viable and optimal pathway to deliver net zero for buildings, industry, transport and power, hybrid heat systems become the dominant option for heating buildings[2].

 

  1. Specifically, heat pumps do provide a viable option for decarbonising heat in certain scenarios, provided that the underlying electricity that is powering the heat pump is decarbonised. The electricity networks in the UK have played a significant role is this decarbonisation of electricity, with approximately 53% of all electricity generated in 2018 from low carbon sources (nuclear and renewables) and over 30GW of distributed generation being connected to the distribution networks, the vast majority of which is wind and solar PV.

 

  1. If paired with thermal or electrical storage, including hot water tanks, heat pumps can provide a significant amount of flexibility, which in turn could be utilised by local DNOs or National Grid ESO. In turn this could reduce the socialised costs of electrical networks and allow the temporal alignment of heating usage requirements with the availability of zero carbon electricity generation. This local storage could also reduce the need for system-wide electrical storage or the over provisioning of generation capacity.

 

  1. ENA works closely with the Heat Pumps Association and Ground Source Heat Pump Association to ensure the electricity networks are ready for the roll-out of heat pumps, and to ensure quicker and easier connection of heat pumps for customers.

 

  1. Heat pumps, although very efficient, could place significant load on the network when clustered within communities that have a poor quality or leaky housing stock, or a lack of local storage, as in these scenarios flexibility cannot play as significant a role as it does for EV chargepoint connections. This is due to average time of use within the household – something which cannot be as easily shifted away from peak load within a house that is not well sealed or does not include storage, like it can for EV charging.

 

  1. Certain types of heat pumps also have a heavy reliance on inflexible direct heating (boost) elements on low temperature days, which again has the potential to significantly increase the network and generation requirements during peak periods. The specification of heat pumps or efficiency measurement methodologies should take this into account, and reward the correct specification, installation and sizing of good quality heat pumps, with a sensible set of assumptions around the lowest temperature conditions in a given area.

 

  1. ENA’s Low Carbon Technologies working group has recently launched a new connections process and associated database for heat pumps, to enable quicker and easier connection of heat pumps for customers. Guidance is also being produced to help installers with sizing and minimising connections costs for customers.

 

  1. ENA  is of the view that heat pumps and heat networks will play an important part in decarbonising buildings but it is important not to discount other technologies - those available now and those that may come in the future - in a manner that limits customer choice, access to heat on demand, increases the cost of energy or impacts system operation.

 

  1. In addition to heat pumps and heat networks, ‘hydrogen ready’ boilers, currently being developed under the BEIS-funded Hy4Heat programme should also be allowed as a ‘low carbon ready’ solution, as should hybrid heating systems. Both of these options are likely to form part of a net zero energy system, along with heat pumps and biomethane, which could be able to deliver negative emissions if certain feedstocks are used to generate the gas in combination with carbon capture and storage. While the government’s long-term approach to heat decarbonisation is still being developed, all of these options should be permitted depending on local circumstances.

 

  1. In its recent report net zero – The UK’s contribution to stopping global warming, the Committee on Climate Change (CCC) unequivocally recognised the role of decarbonised gases in the UK meeting net zero emissions by 2050 alongside CCUS. Hydrogen is noted by the CCC as offering a means of decarbonising industry, transport (HGVs and shipping in particular) and heat that would meet the further ambition of a net zero reduction in emissions[3]. Our members wholly support that conclusion, as well as the critical role CCUS has to meeting net zero.

 

  1. Navigant’s ‘Pathways to Net Zero’ report finds that to meet net-zero emissions low carbon and renewable gases will need to be fully integrated into the energy system. By 2050, all gas end-users will be supplied with hydrogen and/or biomethane. Hydrogen will be produced by natural gas reforming and by electrolysis using renewable and low carbon power sources. Alongside this, energy efficiency measures will be introduced, there will be some electrification across demand (for low-temperature industrial processes for example), and there will be CCUS including from biogenic feedstocks providing negative emissions. This consultation fails to recognise the potential of such technologies and the role of the gas networks in delivering them. ENA’s individual members are expected to publish their own Future Energy Scenarios soon. ENA’s Common Energy Scenario sets out common factors and assumptions across transmission, distribution, gas, and electricity for Ofgem and the RIIO-2 Challenge Group[4].

 

  1. A hybrid heat system using either hydrogen or biomethane in combination with a heat pump reduces annual gas demand, which in turn reduces the required amount of low carbon and renewable gas. The heat pump will provide base load heat and the gas boiler would contribute to meet peak heat demand.

November 2020


[1] CCC (2020) Reducing UK Emissions: 2020 Progress Report to Parliament, https://www.theccc.org.uk/publication/reducing-uk-emissions-2020-progress-report-to-parliament/ 177.

[2] Navigant, Pathways to Net Zero (2019) available at https://www.energynetworks.org/assets/files/gas/Navigant%20Pathways%20to%20Net-Zero.pdf 5

[3] https://www.theccc.org.uk/wp-content/uploads/2019/05/Net-Zero-The-UKs-contribution-to-stopping-global-warming.pdf page 271

[4] http://www.energynetworks.org/assets/files/ENA%20Common%20RIIO2%20Scenario%20report%20-%20March%202019%20FINAL.pdf