National Gas Transmission wins funding for hydrogen ‘backbone’

Ofgem has granted National Gas Transmission £5.6 million to develop plans to create a hydrogen “backbone” in the UK by the early 2030s.

Through Project Union, the company is seeking to construct a 2,000km hydrogen transmission network to connect key production, storage and consumption sites, primarily by repurposing existing gas pipelines.

The pipelines, connecting proposed low-carbon industrial clusters in Teesside, Humberside, Merseyside, Grangemouth, South Wales and Southampton, as well as production sites at the St Fergus and Bacton gas terminals, would be equivalent to around a quarter of the UK’s existing gas transmission network.

Alongside its launch in December, National Gas Transmission submitted a request to Ofgem for £7.9 million of funding through the RIIO2 Net Zero Pre-Construction and Small Project reopener to undertake the feasibility phase of Project Union.

The firm said this work would comprise developing a phasing strategy for the network, including prioritisation and timing for each section; undertaking pre-front end engineering and design activities, including delivering routing options, a constructability assessment and a planning and consenting strategy; and designing regulatory and commercial frameworks for hydrogen transmission infrastructure.

Ofgem has now approved funding for the feasibility stage but reduced the allowed expenditure by almost £2.3 million.

The regulator said it agreed with the needs case set out by National Gas Transmission, noting the alignment with wider UK and EU hydrogen strategies. It said the feasibility phase of the project would provide “clear benefits” to natural gas consumers and support government decisions on the future role of hydrogen.

Ofgem granted National Gas Transmission its full funding requests for six work packages covering the supply chain, technical delivery, network modelling, the asset management plan, the construction plan and data collection.

However, the regulator reduced the allowed expenditure on programme management, market needs analysis and hydrogen policy, and completely disallowed the company’s funding requests for the development of regulatory and commercial frameworks.

It said the development of regulatory and commercial frameworks for hydrogen infrastructure is important but should not be led by a single incumbent gas network at the expense of consumers.

Ofgem also subtracted the company’s proposed contingency funding of an extra 7.5% – amounting to £507,000 – and increased the company’s required contribution from zero to 10% – or £625,000.

The regulator said the cost estimates for the 12-month feasibility stage should be relatively reliable and that National Gas Transmission should make a contribution given the “very substantial” potential benefits to the company from a favourable government decision on hydrogen.