Network

NETWORK / 39 / DECEMBER 2016/JANUARY 2017 Gas HyDeploy £6.8m Other funding – £0.8m National Grid Gas Distribution Project overview HyDeploy will demonstrate, on Keele University's private gas network, that natural gas containing levels of hydrogen (10-20%) beyond those permitted by current safety standards (0.1%) can be distributed and utilised safely and e ciently. The project will provide evidence to make the case for increased use of hydrogen on the network. Ofgem's assesment This project will be the ‚ rst practical deployment of hydrogen onto a live gas network since the 1970s following the move to North Sea gas. It is unlikely to be undertaken as part of business as usual, and there is little direct ‚ nancial bene‚ t to networks doing so. It will contribute to the important debate about the future role of hydrogen in decarbonising heat, and generate knowledge that will be important for both Ofgem and networks companies looking to the next price control. Carbon emissions can be reduced by lowering the carbon content of gas through blending with hydrogen. If successful, permitting hydrogen on the network at the levels proposed has the potential to facilitate between 15 and 29TWh a year of decarbonised heat in Great Britain. The continued use of the existing gas network and household appliances o' ers substantial bene‚ ts to consumers. Keele University's large private gas network is of an appropriate scale and the project has strong support from stakeholders. NGGD has also made a commitment that the equipment used to produce hydrogen will either be reused for a future successful NIC project or the supplier will buy it back and return the proceeds to customers. The project has a clear plan of future trials that would be necessary to facilitate rollout, with the next step envisaged to be a trial on a public network. Realising the bene‚ ts outlined above is also dependent on the supply side of hydrogen developing on an industrial scale, including low-carbon production of hydrogen. The project requires direct interaction with consumers, so Ofgem expects NGGD to conduct a robust consumer-engagement programme to ensure the interests of consumers are fully protected. Future Billing Methodology £4.8m Other funding – £0.5m National Grid Gas Distribution Project overview Great Britain has relied predominantly on North Sea gas since the 1970s – with regulations and the billing regime designed to accommodate this stable and reliable source of fuel. However, the supply market is changing, with gases of di' ering qualities, such as lique‚ ed natural gas and biomethane, being injected into the network. The current billing methodology isn't optimised to cater for gases of signi‚ cantly di' erent quality and this project will develop options for new gas billing methodologies. Ofgem's assesment Ofgem has funded this project but imposed a stage gate a– er the initial stakeholder- engagement phase in the ‚ rst year to ensure that the proposed evidence gathering in the later stages of the project is required before committing customers' money to complete the project. The expert panel had some reservations about the value for money of the project and the methodology, stemming from uncertainty about the extent of the ‚ eldwork required for the project to justify changes to the billing methodology. At the stage gate, NGGD will need to demonstrate more clearly that there is demand for change, and justify its approach for developing its new billing options by using evidence from industry engagement. Until this stage is passed, only £0.8m of the funding will be spent, ensuring value for customers. This extra criterion has the potential to delay the project relative to NGGD's proposed timings, but Ofgem will work with NGGD to reš ect the new requirements. The area of charging has thus far received only limited attention from stakeholders, and will require that they work closely together. A key bene‚ t of the project to customers is to help to open the gas network to more low-carbon gas sources by reducing the need for the expensive and carbon-intensive processing that is currently needed. The project has reasonable ‚ nancial and environmental bene‚ ts, but these will be re‚ ned during the project, with a key deliverable being a detailed cost-bene‚ t analysis of the options for potential future implementation. N ● The Expert Panel was disappointed by the small number of bids to the Gas NIC and it would be keen for the network companies to suggest ways to improve the NIC to attract more submissions. ● It was disappointed that neither of this year's projects is receiving any direct external funding, despite having strong project partnerships. ● It would also have liked more evidence within the full submissions that project partner costs have been robustly market- tested to guarantee customers are getting value for money. ● Both bids could have been improved by having more detailed information on their customer engagement plans in the full submissions. Ofgem Feedback "This year's trials will test a variety of new technologies and arrangements. If they are successful they will provide networks with valuable learning that may be incorporated into their everyday working practices, providing fi nancial and environmental benefi ts to consumers." JONATHAN BREARLEY, SENIOR PARTNER, NETWORKS, OFGEM

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