Written evidence submitted by SGN (CGE0040)

SGN welcomes the opportunity to respond to this inquiry. As you may be aware, SGN manage the network that distributes natural and green gas to homes and businesses across Scotland and the south of England. We deliver a safe, secure and reliable gas supply to 5.9 million customers through 74,000km of pipeline.

With peak heat demand up to seven times greater than peak electricity demand, there is a growing weight of evidence that decarbonising the gas grid will allow for the decarbonisation of heat in the most affordable and least disruptive way. This will allow customers to continue to benefit from a uniquely flexible asset already built to meet 80% of energy needs at peak times on the coldest days of the year.  

Maintaining optionality in the short term is key to ensure potential least cost routes to UK heat decarbonisation are kept open. This includes continuing the programme of investment to replace old metal gas mains with plastic pipes which have the potential to transport hydrogen. We are supporting the evidence base the UK Government is developing on the highest value long-term solution to decarbonise heat through our H100 project. This is looking to demonstrate a 100% hydrogen network in Scotland. Funding for research and demonstration projects like H100 will be key to enable future heat policy decisions.

Our answers to the specific questions are outlined below. We are keen to meet to explore these issues, and discuss our work with the committee. If that would be of interest, we can be in touch to arrange a suitable date and time, either in Westminster or at one of our facilities or worksites. You would of course also be welcome to visit our London depot in Kennington, if this is most convenient.

Answers to specific questions

The strategy – the relative importance of the four main areas identified in the Strategy, and whether the Strategy places the right weight on each of those sectors to deliver emissions reductions

1. We support the approach set out in the clean growth strategy around ‘Improving our homes’ and to decarbonise heat which is hugely important in this context. As the strategy sets out, it is necessary to lay the groundwork in this Parliament to set up decisions around the future of heat in the first half of the next decade. As the Committee on Climate Change (CCC) has said going much further in terms of decarbonising heat in the short term ‘would rely on making long-term choices with an inadequate evidence base, risking excessive costs’[1].
2. With peak heat demand up to seven times greater than peak electricity demand, low carbon solutions which utilise our existing gas network infrastructure can allow for the decarbonisation of heat in the most affordable and least disruptive way[2]. We have developed a pathway to show government and other key stakeholders that there is a viable pathway for decarbonising gas, supporting their process for key strategic decisions in areas such as heat policy. In the short-term by blending green gas such as biomethane and bioSNG into the network. In the medium-term adding hydrogen to that blend. In the longer term the potential to move towards 100% hydrogen networks.

The strategy – progress on meeting carbon budget targets to date and areas where more progress is needed going forward

3. While the UK has made good progress in terms of reducing emissions from electricity generation by around a half since 1990, there has been more limited progress in harder to decarbonise sectors like heat and transport. It is important to consider in this context electricity represents only 21% of the UK’s overall energy consumption whilst heat demand met primarily by the gas network accounts for 80% of UK energy needs at peak times. Therefore, continuing to meet these demands in an affordable way will form a key part of decarbonisation.
4. While it is clear more progress is needed to decarbonise heat out to 2050, ‘no regrets’ policy and regulatory decisions are needed in the short term to keep all the potential least cost routes to UK heat decarbonisation open. We are working to support the evidence base the UK Government is developing over the coming years on the highest value long term solution to decarbonise heat through our H100 project. To enable this, sufficient funding for innovation and demonstration projects needs to be part of the RIIO-GD2 regulatory price control period from 2021 to inform future policy decisions. 

The strategy – the extent to which current and future technologies can help to meet the carbon budgets

5. While electricity demand remains fairly constant throughout the year (c50 GW), instantaneous heat demand in winter can be up to seven times higher than peak electricity demand (c350 GW). Currently our gas network allows these extreme peaks in heat demand in winter to be met in an affordable way, with customers paying a third of the price per unit of gas, than for electricity. Without the gas networks we wouldn’t have the means to transport the vast amounts of energy required during peak periods like during the ‘Beast from the East’ in March 2018[3].
6. The injection of low carbon gas, such as biomethane and hydrogen into the gas networks, will allow UK customers to continue to benefit from our existing gas network, a uniquely flexible asset already built to meet 80% of energy needs at peak times.

Biogases

7. Through the injection of the green gas biomethane, generated by the breakdown of organic material by anaerobic digestion (AD), SGN and the other gas networks are already reducing the carbon impact of the gas flowing through the networks. As biomethane is interchangeable with natural gas, customers can be provided with a low carbon heating solution without the need for new heating systems in their homes or any expansion of gas or electricity networks. There are now 90 biomethane plants connected GB-wide. 36 of these are connected to our network feeding in enough low carbon gas to meet the annual needs of over 180,000 homes. Support for biomethane under the RHI has helped deliver cost reductions and for the UK at one stage to become the fastest growing biomethane market in Europe. The RHI is due to end in 2021. There is a need for Government to ensure their focus on low carbon domestic heating systems does not detract from the need to provide continued support for biomethane injection into the gas grid.
8. BioSNG, generated from black bag waste, is another promising technology that has the potential to increase the amount of renewable gas produced in the UK to 100TWh per year (enough to meet a third of future domestic gas demand). The UK’s first commercial BioSNG plant is under construction in Swindon capable of heating 1,600 homes or fuelling 75 HGVs. This plant is due to start production later this year. The Government now needs to consider how it will support the development of larger BioSNG plants and the potential wider rollout of BioSNG across the UK in the 2020s to help meet carbon budgets.

Hydrogen

9. Hydrogen is an emerging green energy source which could offer a high value, least disruptive solution to the challenge of decarbonising heat. It would leave no carbon footprint as the combustion of hydrogen with oxygen results in water and heat. In the short-term hydrogen could be blended with natural gas in the network, offering the same benefits as biomethane in terms of making use of the existing gas network to decarbonise heat. This means customers can continue to use their existing heating and cooking appliances. In the longer term there is the potential to convert the gas networks to 100% hydrogen thanks to the ongoing investment to replace old metal gas mains with modern polyethelene plastic pipe.
10. Our H100 project is looking to demonstrate a 100% hydrogen network in Scotland. It is part of a coordinated set of projects demonstrating the role a decarbonised gas grid can play in a least cost and lowest impact decarbonisation. If our H100 feasibility study is successful in identifying an optimal demonstration site, the physical demonstration will require more significant funding. As a result, we are calling for sufficient funding for innovation to be included as part of the RIIO-GD2 network price control period from 2021. This will be crucial to enable timely future heat policy decisions from Government.

• How the development and deployment of technology can best be supported, and the extent to which the Government should support specific technologies or pursue a ‘technology neutral’ approach

11. As mentioned previously, we support the review of evidence the Government are undertaking during this Parliament to identify the highest value, least disruptive long-term solution to decarbonise heat at scale across GB. While we see it as key that decisions in the short term maintain optionality and ensure least cost routes to decarbonisation are left open, support for innovation and demonstration projects are crucial in the short term to develop the evidence base to enable a decision to be made in the early 2020s to keep us on track for 2050.

• The relative priority that should be attached to developing new technologies compared to deploying existing technologies, including consideration of the costs and pollution involved in the decommissioning of technologies or infrastructure

12. Utilising the existing gas network to deliver decarbonisation will enable customers to continue to benefit from a uniquely flexible asset which is already built to meet our vast peak heating needs in an affordable way. When comparing different pathways, most current models do not fully account for the costs and the disruptive impact of installing and potentially decommissioning whole new energy infrastructure systems when assessing the deliverability of a pathway.
13. Using the gas system to support decarbonisation can ensure that 284,000km of gas mains which are worth over £17 billion can be utilised long into the future rather than being decommissioned. Making the most of existing infrastructure is particularly important given the transition to decarbonise heat will require over 20,000 households a week to move to a low carbon heat source from 2025 to 2050.
14. Many of the technologies for decarbonising our existing gas network infrastructure already exist but industry standards based on North Sea gas need to be updated. Changing national gas quality standards (GSMR) is a key enabler to allow the gas network to transport greater volumes of low carbon gas. By injecting a different mix of gas into our discreet gas network in Oban for 12 months we demonstrated it had no adverse effect on our network or customer appliances.
15. We are calling on the government to bring forward the enabling legislation to roll out a new standard for gas quality across GB. This could save £325m a year in avoided processing costs and result in lower prices for customers.  This will move gas quality requirements from UK legislation to a new standard to be managed by IGEM. This will simplify the process for future changes to the standard which could be to increase the level of hydrogen allowed. This is currently 0.1% by volume.

• Examples of specific technologies whose development and deployment have been effectively supported so far, as well as those that show particular promise for meeting the Government’s carbon emissions targets or supporting the UK’s economy, or which would benefit from specific Government action, in the future

Biomethane

16. Biomethane has been one of the success stories under the Renewable Heat Incentive (RHI) scheme as it can be delivered using the existing gas network and used in existing appliances. There are already over 90 plants connected to the gas network across Britain, 36 of which are in our company footprint, producing locally produced sustainable gas to meet the annual needs of over 180,000 homes. SGN and the other GDNs have helped deliver cost reductions that means biomethane plants are now economical at a level of support 30% lower than when the RHI began.
17. The CCC has said increasing volumes of biomethane injection into the gas grid is a low regret opportunity to reduce emissions now. The biomethane market has suffered from uncertainty over the levels of support available under the RHI. A priority for Government needs to be ensuring the initial focus on the post-2021 stimulus for low carbon building level heating systems does not detract from the need to provide support for biomethane or bioSNG injection into the gas grid.

Hydrogen

18. Hydrogen is an extremely promising low carbon energy source, with virtually zero emissions at the point of use, and a versatility of applications. The Iron Mains Replacement Programme is replacing the majority of the UK’s gas distribution network with plastic polyethylene pipes, which have the potential to transport 100% hydrogen. In the short term the gas networks are investigating the potential to increase the hydrogen blend in the current gas grid from the current limit of 0.1% to up to 20%, without the need to change appliances. In the longer term, our H100 project will look to demonstrate the safe distribution of 100% hydrogen in a purpose-built network we are looking to build in Scotland.  

• The role of the Industrial Strategy ‘Clean Growth Grand Challenge’, and what the Government should do to ensure it contributes effectively to meeting emissions targets.

19. We believe the Clean Growth Grand Challenge (and the Industrial Strategy Challenge Fund) can help support the significant potential for the UK to become a global leader in decarbonised gas and the hydrogen economy. We see a particularly important role to support the decarbonisation of energy intensive industries who rely on high temperature processes and hydrogen currently appears the only fuel that will enable them to decarbonise their operations.
20. The Clean Growth Grand Challenge and Industrial Strategy Challenge Fund are ideally placed to support large-scale pilot projects, together with the research and development of component technologies.  Together with supportive policies, they can provide the foundation for a wider roll-out of low carbon industrial projects.

October 2018