Utility Week

UTILITY WEEK | SEPTEMBER 2021 | 7 The Month in Review Domestic boilers to be hydrogen-ready All new gas home heating boilers may have to be "hydrogen-ready" by 2026, the government has revealed, while unveiling plans for a CfD (contract for difference) style mechanism to help spur production of the fuel. In its Hydrogen Strategy, published on 17 August, the BEIS (Business, Energy and Industrial Strategy) department said it would consult later this year on the case for enabling or requiring new natural gas boilers to be convertible to the fuel by 2026. The same date, the strategy says, is when the government will be able to make strategic decisions on the role of hydrogen for heat in buildings. The proposals to create a CfD for hydro- gen production are outlined in a consulta- tion paper accompanying the strategy. Under the paper's preferred business model, hydrogen producers would be paid a "variable" premium for the fuel. This premium would be the gap between a strike price, which is required to cover the costs of producing hydrogen, and a reference price that reflects the market. Utility Week's inaugural Hydrogen Forum takes place 12 November 2021. Find out more at https://event.utilityweek.co.uk/ hydrogen CMA backs Ofgem's decision to cut returns for network operators The Competition and Markets Authority (CMA) has largely upheld Ofgem's decision to drastically reduce returns to energy network investors. In its provisional decision on the appeals brought by all of the transmission and gas distribution networks against their final determinations for the RIIO2 price controls, the CMA found in favour of Ofgem on most of the 12 grounds. It stated that energy networks had failed to demonstrate that the regulator had erred in determining the cost of equity and the compo- nent in its calculation – total market returns, the risk-free rate and the equity beta – under the Capital Asset Pricing Model. The authority said it had seen "no compelling evidence" that Ofgem had set the cost of equity too low or that the regulator should "aim up" from this rate, describing the latter as a matter "regulatory judgement". However, the CMA ruled against Ofgem's decision to set allowed equity returns 25 basis points below its actual estimate of the cost of equity, known as the outperformance wedge. The authority has also provisionally over- turned Ofgem's decision to apply an "innova- tion upli‰" of 0.2 per cent when determining the cost reductions expected from improve- ments in efficiency in the sector. The Environment Agency has unveiled proposals to rejig water abstraction rules in a bid to safeguard water supplies. The fees licence holders are charged to take water from the environment will be based on the volume of water abstracted, where it is taken from, and how much will be returned. "The new [price] cap level takes effect in October when millions of people will see a reduction in their incomes. This toxic combination of higher prices, reduced incomes and leaky, inefficient housing, will lead to a further surge in utility debt." Peter Smith, director of policy and advocacy, National Energy Action £1,277 Level of new price cap for customers on default tariffs paying by direct debit – an increase of £139 – from 1 October 40,000 Number of places available on courses for training heat pump installers under new scheme 2% Hybrids share of new car market in July, double that of July 2020 20% Per capita consumption cut Portsmouth Water aims to achieve with smart meter trial

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