Utility Week

18 | OCTOBER 2021 | UTILITY WEEK Policy & Regulation Analysis BEIS hedges its bets on heat The government's hydrogen strategy provides glimpses of its approach towards decarbonising heat but, as David Blackman discovers, its key proposals pose more questions than answers. W hile some of his Cabinet colleagues were notoriously holed up at holi- day resorts, Kwasi Kwarteng spent August making up for lost time. The business, energy and industrial strat- egy (BEIS) secretary had been keen to pub- lish the government's long-awaited hydrogen strategy before parliament rose for its sum- mer recess but was unable to do so. However, rather than waiting for MPs and peers to reconvene in September, the strategy and an accompanying suite of docu- ments were pushed out in mid-August. Julie Cox, senior policy adviser on gas for Energy UK, says it is unusual for such a heavyweight policy to be published during a recess. "It shows the government realised it needed to get the strategy out," she says. Kwarteng's impatience is understanda- ble: the hydrogen document is a cornerstone of the wider energy strategy that is taking shape in the run up to the COP26 climate change summit, which kicks off in just under two months. "It's another step towards clearing the path to COP26 that the government can point to," says Mike Foster, chief executive of the Energy and Utilities Alliance. The strategy lays some of the groundwork for developing a UK hydrogen production industry, the centrepiece of which looks set to be a contracts for difference (CfD) style mechanism to stimulate the sector. But the strategy is less clear on the demand side. It projects that consumption of hydrogen for heating could be anywhere between 0 and 45 terawatt-hours (TWh) per annum by 2030. The key decision for utilities, whether hydrogen will be used for domestic heating, is not due to be made until 2026, according to the strategy. This timetable is designed to allow time for various trials to be carried out on whether the fuel is safe to use in homes. While the government mulls over whether hydrogen should be given the green light for home heating, it has set a target of 600,000 heat pump installations per annum by 2028. These differing timetables give electrifi- cation a "head start" in heating, says Anise Ganbold, global energy markets lead at con- sultancy Aurora Energy Research. Potential investors in hydrogen may hold off doing so in order to establish whether the incentives prove attractive, she adds. Dr Angie Needle, director of strategy at Cadent, says the 2026 timetable is "too slow" and that uncertainty over the future of heat- ing will make managing the evolution of the gas network more difficult. Conversion of the gas grid could hap- pen rapidly, though, once the go-ahead for hydrogen has been given, says Gus McIntosh, director energy futures of gas network SGN. "We can go very fast once we make the deci- sion," he says, pointing out that the indus- try's ongoing programme to replaces its iron mains with plastic pipes by 2032 puts the gas grid on track to be hydrogen compatible. Replacing the transmission network will only make up about a tenth of the total cost of transforming the gas system to hydrogen, dwarfed by those relating to producing the fuel, he adds. Kicking the can down the road The contrasting paces the government is adopting towards hydrogen and electrified heat reflects the relative maturities of the technologies, argues Dr Richard Lowes, sen- ior associate at The Regulatory Assistance Project. "You can't help but feel that deci- sions are being put off because hydrogen is such a long way away," he says. Pointing out that it already makes sense to fit off-gas grid and new-build homes with heat pumps because they are not already connected, Lowes says: "Whatever happens, we know we are going to need a lot more heat pumps." Nevertheless, efforts to decarbonise heat could be set back by the lack of clarity on policy in the area, says Ganbold. "It's kicking the can quite far down the road because peo- ple need to invest now in the right technol- ogy. It's disappointing that they are going to delay the decision for four or five years." Tim Lord, senior fellow at the Tony Blair Institute and former director of clean growth at the BEIS department, agrees. "If your stra-

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