Energy and Utilities

The Energy Transition | Hydrogen blending in 2023 and net zero London by 2030

Published on 24th Jan 2022

This week, we look at the UK's gas grid being ready for hydrogen blending from 2023, the Mayor of London's plans for a net zero London by 2030, ScotWind leasing seabed rights to offshore wind projects totalling 24.8GW, and more.

UK's gas grid ready for hydrogen blending from 2023

The Energy Networks Association (ENA) has announced that the UK's gas grid will be ready to start blending hydrogen around the country from 2023. Published within its 'Britain's Hydrogen Blending Delivery Plan', the ENA sets out how all five of Britain's gas grid companies will be able to meet the government's target for Britain's network of gas pipes to be ready to deliver 20% hydrogen to homes and businesses around the country from 2023. The Plan builds on the progress made through the HyDeploy project, which it states demonstrated that blending hydrogen with natural gas is achievable and safe.

The Delivery Plan sets out two options that the Department of Business, Energy & Industrial Strategy (BEIS) could utilise in order to implement the market and regulatory changes required to facilitate hydrogen blending: a Strategic Approach and a Free Market Approach. The former approach would "designate connection locations based on the most suitable parts of the network", whilst the latter approach would "let the market decide where to inject hydrogen into the network".

The Plan sets out the legal changes that must be made by the government and regulatory bodies across five key 'Market Pillars':

  1. Primary Legislation Pillar: this pillar is a crucial part of facilitating hydrogen blending as it will define the powers that important players such as Ofgem and BEIS will have. Other pillars are also dependent on primary legislation changes occurring.
  2. Regulation Pillar: this pillar relates to secondary parliamentary legislation, such as Statutory Instruments that impact Great Britain's gas industry.
  3. License Pillar: the Gas Act 1986 has formalised the licence change process, prohibiting certain types of activities unless the entity carrying it out that activity is licenced. There are currently four types of gas licences: Transporter, Interconnector, Shipper and Supplier. It is yet to be seen whether hydrogen blending will require changes to be made to the conditions within these licences.
  4. Code Pillar: a review is needed of the Uniform Network Code, a legal and contractual framework to supply and transport gas, to make sure that hydrogen blending is allowed with the Code's framework.
  5. Safety Pillar: currently gas quality limits are set out in the Gas Safety (Management) Regulation which allows only 0.1% of hydrogen within the gas mix . A case is being prepared by IGEM Gas Quality Working Group to amend these restrictions.

David Smith, Chief Executive of the ENA, said, “[t]his plan sets out the changes needed to deliver cleaner, more secure energy supplies for all. What’s key is that the government does its bit too by lifting its target for homegrown hydrogen production this decade. Doing that today will help gas grid companies deliver for tomorrow.”

Mayor plans for a net zero London by 2030

A new report commissioned by the Mayor of London sets out the possible routes to a net zero London by 2030. To achieve this target, the report insists that significant action must be taken immediately; especially since the target for London precedes the wider UK net zero target of 2050.

The report sets out four different potential scenarios that could occur:

  1. High Electrification and High Hydrogen: these two scenarios align the closest with current UK-wide targets (i.e. a 68% reduction in emissions by 2030 relative to 1990 levels); however they both exceed this UK-level commitment. Given that the roles of electrification and hydrogen in the net zero strategy are not anticipated until the mid-2020s, the former scenario favours electrification of heat and transport, whilst the latter assumes that hydrogen is available at scale in the long-term. The report suggests that High Electrification will decarbonise faster, at 27% residual emissions in 2030, in comparison with 30% residual emissions in 2030 for High Hydrogen (as hydrogen relies on conversion on the gas grid, which happens after 2030).
  2. The No Constraints scenario: this scenario is the most ambitious and "represents a significantly accelerated decarbonisation pathway that aims to deploy all possible policies and measures to reach the minimum achievable residual emissions by 2030." This would include policies such as getting rid of boilers at an early stage. This scenario is not restricted by constraints surrounding costs or the ability to implement difficult policies and bring about the required changes in a short timeframe. This scenario would reach 14% residual emissions, relative to 1990 levels, by 2030.
  3. Accelerated Green scenario: this scenario represents a middle ground scenario with London "decarbonising as rapidly as possible ahead of national targets while leaving long term technology options open as far as possible.". Amongst other things, this would allow some heating systems to remain connected to a blended gas grid. This scenario would reach 22% residual emissions by 2030 and would require "ambitious levels of behaviour change and as ambitious technology rollout as possible without requiring widescale scrappage."

One of the key areas that the Mayor hopes to transform is the transport sector. It has been suggested that whilst there was a 57% reduction in workplace greenhouse gas emission and a 40% reduction in emissions from homes between 2000 and 2018, there was only a 7% reduction in emissions from transport during the same time period. In order to reduce transport emissions, the Mayor would like to see a move away from petrol and diesel vehicle use and towards active travel such as walking and cycling, increased use of public transport and cleaner vehicles.

The report proposes that a new road user charging system is needed in London by the end of the decade if there is to be close to a 27% reduction in car vehicle kilometres. A new charging system could get rid of existing road user charges, such as the Congestion Charge and the Ultra Low Emission Zone, and "replace them with a simple and fair scheme where drivers pay per mile, with different rates depending on how polluting vehicles are, the level of congestion in the area and access to public transport". It is envisaged that there will be exemptions and discounts for those on low incomes and with disabilities. However, the Mayor recognises that the technology that is needed to implement this may be years away from being ready and that different approaches will need to be considered.

ScotWind leases seabed rights to offshore wind projects totalling 24.8GW

Crown Estate Scotland has announced the results of its 2022 ScotWind offshore wind leasing round, which has seen option agreements offered to 17 projects with a total capacity of 24.8GW. This marks the first Scottish offshore wind leasing round in over a decade.

Of 74 total applicants, 17 successful projects now have the chance to reserve the rights to specific areas of seabed and then put forward a full agreement for an offshore wind farm. They will pay a total of just under £700 million in option fees, which will be passed to the Scottish government for public spending. If any successful applicant does not proceed to sign a full agreement, the option will instead be offered to the next highest scoring applicant.

Up to 8,600km2 of seabed was made available through the Scottish government's Sectoral Marine Plan, of which just over 7,000km2 has been awarded in this leasing round. The successful projects comprise a combination of fixed, floating and mixed technology; over 16GW of the total 24.8GW of capacity has been allocated to floating wind farms, which can be installed in deeper waters where winds tend to be stronger.

HSBC UK launches its £500m Green SME Fund

HSBC UK has launched a £500 million fund to support small and medium-sized enterprises (SMEs) in the transition to net zero. The fund was announced at COP26 last year and officially launched on 17 January 2022.

The funding is available to businesses with a turnover of under £25 million and offers 1% cashback on loans, starting from £1,000. To qualify for the cashback, applicants must submit evidence that the loan will be used for 'green activities' that meet HSBC's eligibility criteria.

The Green SME Fund is intended to "make it easier for small businesses to take practical steps to cut their emissions", and forms part of HSBC's wider commitment to provide $750 billion and $1 trillion of financing and investment to support its customers over the next decade. Alongside the fund, HSBC UK is also launching a sustainability assessment tool to provide businesses with practical insights and resources to help them to decarbonise.

Government issues response to proposals to extend NDRHI commissioning deadlines

The government has issued its response to proposals to extend Non-domestic Renewable Heat Incentive (NDRHI) commissioning deadlines by 12 months for existing tariff guarantee and extension application deadlines.

The NDRHI closed to new applicants on 31 March 2021. To support projects through the Covid-19 pandemic, the government implemented a number of measures, including extending the second tariff guarantee allocation (TG2), establishing a third tariff guarantee allocation (TG3) and giving plants affected by Covid-19 an additional 12 months to commission through an 'extension application'.

In recognition of the ongoing difficulties many projects continue to face in light of the pandemic, on 29 November 2021, the government proposed to extend the deadline for commissioning for eligible TG2, TG3 and extension applications by 12 months from 31 March 2022 to 31 March 2023. The intention is to ensure that projects that otherwise would have been able to commission by 31 March 2022 are still able to commission despite the disruption. The extension only affects applicants who have already made a tariff guarantee or who have successfully made an extension application.

On 19 January 2022, the government published its response to the proposals, revealing that all respondents expressed strong support and cited issues such as shortages in materials, labour issues and increased delays in supply chains as reasons for delays in commissioning NDRHI projects. The government has therefore decided to implement the 12-month extension to 31 March 2023 for all NDRHI technologies with eligible TG2, TG3 or extension projects. While the original proposal excluded biomethane projects, the extension will apply more broadly to biomethane projects that could not become eligible for the Green Gas Support Scheme (GGSS). It will not, however, apply to NDRHI biomethane projects that would become eligible for the GGSS if their current tariff guarantee application timed out. The extension will apply automatically to existing eligible applications.

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* This article is current as of the date of its publication and does not necessarily reflect the present state of the law or relevant regulation.

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