Energy and Utilities

The Energy Transition | National Grid's £60 billion investment strategy to decarbonise energy system revealed

Published on 3rd Jun 2024

Welcome to our top picks of the latest energy regulatory and market developments in the UK's transition to net zero

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This week we look at National Grid's £60 billion investment strategy to decarbonise the energy system, calls from the Public Accounts Committee for a gas decommissioning plan by June 2025, a Regen report into achieving regional net zero targets, and more.

National Grid's £60 billion investment strategy to decarbonise energy system revealed

As part of its full year financial results, National Grid has announced a £60 billion, five year investment plan to "accelerate the decarbonisation of the energy system for the digital, electrified economies of the future".

This figure represents nearly double the level of capital investment made by National Grid during the past five years. Under the plan, £51 billion of the proposed investment will be aligned to the EU Taxonomy to decarbonise energy networks. On a more granular level, 80% of the capital investment will be allocated for the expansion of electricity networks.

To fund the plan, National Grid is preparing for a £7 billion, fully underwritten rights issue. It also intends to sell off a number of its renewable businesses, including National Grid Renewables (its US onshore renewables division) and its UK-based liquefied national gas asset, Grain LNG.

As part of the announcement, National Grid highlighted other areas of progress from Ofgem and the government in supporting UK energy networks. This included the Future System and Network Regulation and Ofgem's Sector Specific Methodology Consultation.

Public Accounts Committee calls for gas decommissioning plan by June 2025

The Public Accounts Committee (PAC) has published its report into the decarbonisation of home heating. The report includes recommendations for the Department for Energy Security & Net Zero (DESNZ) to help it to reach its decarbonisation commitments, including its plan to achieve 600,000 heat pump installations per year by 2028.

Though DESNZ increased grants for air source and ground source heat pump from £5,000 to £7,500 in December 2023, the PAC report found that most households will still require an additional £5,000 to cover the total cost, based on the average cost in 2023. The report also identified the following as further barriers to the adoption of heat pumps: higher running costs of heat pumps compared to the gas alternative; a lack of sufficiently trained installers; and continued complexity around the process.

The report welcomes DESNZ's decision in May 2024 to scrap the requirement for households to meet recommendations on insulation improvements (identified in Energy Performance Certificates) prior to installation of a heat pump. However, it additionally recommends that an easy-to-use website should be created to make the heat pump landscape more accessible for consumers. The report also asked DESNZ to publish its report into the cost of heat pumps among different socio-economic groups by January 2025 to improve transparency for consumers.

More widely on decarbonisation, the PAC report called for DESNZ to produce a fully costed gas network decommissioning plan over the next year, voicing concerns that a limited upfront understanding of the costs of decommissioning will result in taxpayers footing any additional costs. The report noted that this had previously occurred in the nuclear sector, where taxpayers had to cover the cost of decommissioning seven nuclear assets to the sum of £10.7 billion.

The report recommends that DESNZ "should, by end-June 2025, set out how it will undertake any required decommissioning of the gas networks, including how it will be funded". While DESNZ has conceded that it needs to increase its work to look at future decommissioning, it is yet to confirm whether decommissioning will be funded by the taxpayer, the gas networks or a levy across the industry.

The report also pushed DESNZ to clarify its approach to town-level trials of hydrogen home heating, following its recent termination of local pilots after fierce local opposition. DESNZ has said that hydrogen "may have a role to play in heat decarbonisation", but without a definitive report the PAC fears that this "uncertainty for industry to plan and invest on a wider scale could hamper overall progress" to decarbonise the housing sector.

Regen report explores regional level needs to reach net zero targets

In its recent report, "Roadmap to RESP", the not-for-profit consultancy Regen has explored how the role of Regional Energy Strategic Planners (RESPs) and local area energy planning can help to achieve regional net zero targets.

Regen stated that strategic planning of the energy system at a local, regional and national level is needed to deliver against the UK's net zero targets. Therefore, at a sub-national level, RESPs will be created by the National Energy System Operator with a view of substituting the traditional top-down approach to energy planning with a more dynamic and localised model.

Broadly, RESPs will be responsible for producing consistent regional plans, aligning local and national plans and enabling wider input and collaboration on local and regional energy goals. More narrowly, the report envisions RESPs having the specific responsibilities of:

  • developing plans showing a region's current and future demand and providing consistent standards for data;
  • guiding on shared standards and processes for local area energy plans; and
  • mapping existing and significant stakeholder relationships to understand who to engage with and having a hands-on approach to resolving conflicts between stakeholders.

In noting that the RESP system may take some time to establish, Regen made some interim recommendations including:

  • government financial resource and guidance for all local authorities to deliver a local decarbonisation plan;
  • the creation of an industry-wide 'in-development' register to support better targeted energy system investment;
  • trialling a regional board structure to set common regional objectives; and
  • including more opportunities for regional feedback on investment plans and enhanced clarity in the anticipatory network investment process.

The report emphasises that unlocking regional value in the interim is important to allow RESPs to "hit the ground running".

Electrifying the Future: ChargeUK's 12-Point manifesto for accelerating EV infrastructure and investment

ChargeUK has published its election manifesto titled "Our Electric Future: ChargeUK’s manifesto for the next Government". The manifesto pinpoints 12 areas of focus for improved Electric Vehicle (EV) rollout in order to meet net zero targets. As a priority, ChangeUK has called for more EV chargers, EV affordability and the maximisation of private investment.

ChargeUK is a trade association which was launched earlier this year and represents companies involved in the rollout of EV infrastructure. The body has committed to investing £6 billion in EV charging by 2030.

The manifesto highlights the need to reduce obstacles to the expansion of the number of EV chargers. Some of the measures that are suggested to support an expanded rollout include incorporating EV chargers within Permitted Development Rights and including renewable electricity in the governments Renewable Transport Fuel Obligation.

ChargeUK also recommends that the government equalises VAT at 5% for both public and private charging to reduce the cost of EV ownership for the general public, working to lower the cost of electricity and working with National Highways to improve infrastructure such as charging signage.

The National Infrastructure Commission has confirmed that the UK is on track to meet the government's goal to have 300,000 public charge points installed by 2030. The ChargeUK manifesto however states that the current use of private investment is not being maximised to increase EV infrastructure and that better use should be made of the Rapid Charging Fund, the Local EV Infrastructure Fund and developing the ability to develop HGV charging.

UK crematorium to switch fossil gas for green hydrogen in "world-first" trial

A "world-first" green hydrogen trial has been announced at Worthing crematorium. Supported by the government's Industrial Fuel Switching Competition, Worthing crematorium is running a four-week trial between 20 May 2024 to 14 June 2024.

The project, named "HyCrem" involves running one of three cremators on 100% green hydrogen, instead of fossil gas. Cremation is an energy-intensive process, with nearly all crematoria using natural gas. Green hydrogen offers a sustainable alternative, as it is produced using electricity from sustainable sources and does not release carbon emissions when burnt, like natural gas.

Adur & Worthing Council has selected Worthing crematorium for the trial as it has the largest carbon footprint across its sites. The Council is committed to becoming a carbon neutral authority by 2030 and a net zero borough by 2045, and the HyCrem project is intended to help meet these targets. Throughout the four-week trial, the University of Brighton will be monitoring changes in emissions and a business case will then be developed to permanently reduce emissions at the crematorium.

Abigail Dombey, the project manager for HyCrem at Net Zero Associates, said, “it's incredibly exciting to be part of this project which will identify how we can do so [transition to net zero] - and is even a world first.

This article was written with the assistance of Khushal Thobhani, Jessica Sawford, Charlotte D'Arcy, Luke Hopper and Hannah Bradley, trainee solicitors.


* 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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