Gas distribution networks have tried to remain positive about this week’s update from government on its hydrogen strategy.
The backing for 11 green hydrogen production facilities, with a government-guaranteed price for the energy produced, the opening of the next allocation round and support for hydrogen blending were all meaningful steps forward.
However, the decision to scrap the proposed hydrogen village trial in Redcar clearly represents a significant blow to the gas networks’ plan to build an evidence case for hydrogen in domestic heating.
The project, which appeared at first to be far less controversial than the one-time rival scheme in Whitby, had recently started to attract criticism that it did not have sufficient public backing. Last week the leader of the local council warned the government that support was dwindling, although sources close to the project insist this was down to a vocal minority and the influence of external campaigners.
However, the death knell for Redcar was a separate government decision not to approve BP’s proposed HyGreen Teeside production facility in the aforementioned allocation round. This had been earmarked to provide 80% of supply to the Redcar project.
The decision not to support HyGreen Teeside seems to me quite a convenient opt out for government and when I suggested as much to several gas network sources over the past 24 hours I got a Francis Urqhart-style ‘I couldn’t possibly comment’ response each time. The department for energy security and net zero defended its stance by saying there was a “rightly robust process” to assess applications to the hydrogen allocation round, based on value for money and the likelihood of being operational in the required timeframe. It has said BP is welcome to submit applications for future rounds.
The key question now is whether government can really build the evidence case for repurposing Great Britain’s gas grid that would inform its promised decision in 2026 on the role of hydrogen in home heat. It has pointed to learnings from SGN’s H100 project in Fife but this relies on a newly-built network rather than repurposing the existing one. It also claims it can learn from a range of trials across Europe and that valuable evidence was gleaned from the work done on the hydrogen village trials.
Perhaps but clearly that real world evidence that was due to come from the village trials will leave a big gap in the research.
One source told me: “This is yet another example of government kicking the can down the road. The hydrogen village trial was always supposed to be a crucial piece of the evidence for the 2026 decision and the basis for the town projects that would follow if the decision was to proceed. I’m not clear if they’re saying we don’t need that anymore or if they see other ways of getting that evidence.”
Another industry figure said said: “This feels very much like the current government throwing an impossible job over to Labour who will either have to make a decision without that live evidence, start the whole process again and push the date back or say it’s too late for hydrogen. Under any scenario they will upset someone.”
In particular there is a growing clamour from the unions for Labour to support the various use cases for hydrogen, including heat. However, there seems no evidence to date that Labour is keen to delve into such a sensitive debate before the election.
But as Ofgem (fairly explicitly) pointed out this week, the “status quo is not sustainable” and there is urgent need for clarity on the future of the gas grid. Ofgem’s early indications for the next price control for gas networks, from 2026 to 2031, show it wants to explore “smoothing” potential costs for decommissioning parts of the gas network from RIIO3. It also echoes calls previously reported in Utility Week for an honest conversation about how decommissioning would take place, and how much it would cost.
A recent Arup report for Ofgem and the National Infrastructure Commission estimated the cost of decommissioning at up £79 billion, or approximately £1,150 per household. Government will need all the evidence it can get to decide if that price is worth paying.