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The Topic: Flexibility UTILITY WEEK | 30TH JUNE - 6TH JULY 2017 | 13 The future of gas Following a concerted lobbying effort and some political rethinking, the continued role of gas in the energy mix is looking ever more likely. The reasons for this are twofold: first, there is a general recog- nition of the significant role gas continues to play in generation; and second, efforts to green the gas networks are bearing fruit. The gas industry is making a concerted and co-ordinated effort to explore new, greener uses for the gas distribution networks. One of the most prom- ising of these is the injection of hydrogen into the gas grid, which provides a lower carbon alternative to traditional natural gas which can be used in the same way for heating homes and other buildings. Before hydrogen can be injected into the grid at scale, it needs to be shown to be safe and suitable for use with current infrastructure and customers' current appliances. To this Despite the rhetoric around sus- tainable energy, gas continues to be one of the major energy sources in the UK. Speaking at Utility Week Live, David Salis- bury, head of network engineer- ing at National Grid, pointed out that on the recent day where the UK famously used no coal-fired power for the first time since end, two of the gas distribution networks – Cadent (formerly National Grid Gas Distribution), and Northern Gas Networks – have established a pilot project using innovation funding. The HyDeploy project will see the networks blend hydrogen with natural gas on a private network at Keele University. The safety of the approach will be tested as well as its impact on end customers – who, it is hoped, will not notice any differ- ence arising from the changed mix of gas. If successful, the project could pave the way for the mass rollout of hydrogen in the gas networks. records began, more than half of the power that was used came from gas. Salisbury also highlighted the significant use of gas as a direct energy source, mainly as heat. He pointed out that the UK still gets 2.6 times as much energy from gas as it does from electricity. GAS-FIRED GENERATION Despite the demise of coal and rise of re- newables, gas is still an essential part of the generation mix. GREEN GAS Hydrogen could be the big play. Report sponsored by: THE HYDEPLOY DEMONSTRATION PROJECT Rollout across the networks Hydeploy First practical UK demon- stration of hydrogen into representative, but closed private network Extensive, existing desktop work. UK, Europe and international studies HyStart NIA UK ENERGY DEMAND Gas: 880TWh Electricity 334TWh 2.6x as much energy via gas There is scope because… Potential gains from local market between water and sewerage companies. Unrealised gains from market with firms in wider waste markets. Dynamically increasing demand over time – change in biosolids use and technology. Relatively less stranded asset risk – shorter asset lives than other water industry assets. We know this because… We have analysed the scope for trades between companies by geography. We have surveyed potential entrants. We have analysed usage patterns over time. We have examined investment requirements. Energy to the grid or locally Third parties could provide one or more services including transport Energy production Alternative incumbent WWTW Transportation of sludge Transportation of sludge Transportation of sludge Recycling to land or disposal through other outlets STC treatment of sludge Dewatering centre Production of sludge (high water content) Incumbent WWTW Liquor We will be consulting on how in 2019 we will be setting prices for the period 2020-2025. In the way we set prices we expect to: • Continue with traditional building blocks to calculate revenues. But we will be proposing to introduce an element of risk into the investment companies undertake after 2020; • Set an average revenue control, meaning that the revenue companies will be allowed to collect from their customers will vary directly with the amount of sludge their sewage treatment works produce; • Use "tonnes of dry solids" as the measure of sludge quantities; and • Encourage improving measurement of sludge production. We aim to bring focus and management attention to bear, and reveal information about costs and revenues associated with bioresources services. Our assessment suggests there are considerable benefits for customers, companies and the environment by opening up bioresources services to markets, where efficiency and innovation can thrive. Promoting markets means: • WaSCs trade with each other to improve efficiency in the short term; • more efficient investment to optimise processing across company boundaries in the longer term; and • better interaction and integration with the wider organic waste market, enabling efficient site and resource sharing Trust in water Trust in water 6 13 Evidence supports promoting markets in bioresources Expected market interactions Price control for bioresources Why do we think there is scope to use markets? What do we need to address to realise the benefits? Consistent with 2011 OFT study Missing information Regulatory incentives Cultural issues Environmental regulation Transport costs Outside our influence/control Within our influence/control £ £ £ Trust in water 7 Hydrogen trial into public network