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8 | 15TH - 21ST JULY 2016 | UTILITY WEEK Policy & Regulation This week 'Evolve gas networks' to decarbonise heat KPMG says evolution of the gas network is the cheapest way to deliver heat decarbonisation Evolving the gas network to use green gases is the cheapest and most practical way to tackle the heat decarbonisation challenge, according to a report commis- sioned by the Energy Networks Association (ENA). Utilising the existing gas distribution and transmission assets and adapting them to cope with green gases is predicted to cost £104 billion to £122 billion by 2050 – estimated to be at least £34 billion cheaper than alternative methods. In the KPMG report, the other options to decarbonise heat are self-generation and other energy solutions, diversified energy sources, and an all-electric future. These are predicted to cost £251-£289 billion, £156-£188 billion, and £274-£318 billion respectively. The evolution of the gas network is also deemed to be the most practical in terms of technical feasibility and in terms of what consumers are most willing to accept. The ENA said that whatever path is chosen to decar- bonise heat, a large investment will be required, and that the optimum solution will feature elements from all of the four scenarios. ENA chief executive David Smith said: "Heat accounts for 45 per cent of the UK's energy needs and this report demonstrates the scale of the challenge facing the UK as we look to decarbonise the sector in a secure and affordable way." KPMG director and author of the report, Robert Hull, added: "Important strategic choices lie ahead for the industry and this report can help inform the debate." MB ENERGY Plant delays drive up capacity targets The government has been forced to increase the buying target for the main capacity market auction because several plants missed their delivery deadlines. Energy secretary Amber Rudd said the target recommended by National Grid did not take full account of the delays. The government will pur- chase 52GW of capacity in the four-year-ahead (T-4) auction for the winter of 2020/21, scheduled for December. In a letter to National Grid, Rudd noted that three plants – Trafford, Cottam and West Burton – had failed to meet their capacity market milestones for delivery in 2020/21. She said the recommended target had only accounted for delays at two of the plants and not all three. The delay to the third plant would mean the absence of 5GW of capacity rather than just 3.4GW. GAS Fracking could blow carbon budgets Hydraulic fracturing could blow the UK's carbon budget unless stricter regulations are intro- duced, the Committee on Cli- mate Change (CCC) has warned. If the controversial gas extraction technique is to find widespread use in Britain, the CCC says three tests will have to be met. First, the development, production and decommission- ing of wells must be "tightly regulated and closely moni- tored" to prevent methane leaks. Second, overall gas con- sumption must not rise unless the extra gas is used in place of other fossil fuels or with carbon capture and storage. The CCC said domestically produced shale gas will probably have to displace imports. Third, emissions from shale gas wells will also have to be offset by reductions elsewhere in the UK economy. WATER Firms must work out sludge costs Water and sewerage companies have a lot of work to do in a short time if they are to make informed choices about the com- ing deregulation of the sludge market, said experts at the UK AD & Biogas conference. The sludge market is set to open as part of Ofwat's Water 2020 proposals, but wastewa- ter utilities will have to decide before then whether they will compete in the market, form partnerships with other compa- nies or exit the market by out- sourcing their sludge operations. The regulator will be engaging with water companies on these issues from next year as part of the PR19 price review process. Existing gas assets to go from blue to green? Political Agenda Mathew Beech "May's voting record doesn't suggest she is a green Tory" Theresa May should now be familiarising herself with the layout of No 10, having spent her first few days as Britain's new prime minister. The country's longest serving Home Secretary has seen off the Tory competition and swily taken the top job – replacing David Cameron, who is still licking his Brexit wounds. May has got an in-tray bow- ing under the weight of demands coming from the EU seeking Article 50 activation, potential PM, but slightly more concern- ing for utilities could be the fact May has never voted on financial incentives for low-carbon emis- sion electricity generation. Certainty is what the sector craves – whatever the policy road that is followed. The one thing worse than a decision going against you is not having a decision at all. Let's hope that May does not allow the UK utility sector to get lost behind everything else going on in the Downing Street office. Cabinet members pitching for promotion, as well as the pleth- ora of enquiries that are involved in the day-to-day running of the world's sixth biggest economy. Her voting record doesn't sug- gest that May is one of the green Tories, part of the hug-a-husky generation led by Cameron. She has generally voted against measures designed to prevent and limit climate change, including opposing legislation requiring a strategy for carbon capture and storage, as well as against setting a decarbonisa- tion target for the UK within six months of June this year. Greater regulation on fracking has been opposed by the new