Energy and Utilities

The Energy Transition | UK and Germany agree new hydrogen partnership

Published on 2nd Oct 2023

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 the recent announcement of a hydrogen partnership between the UK and Germany, new funding to upgrade heat network projects, a gas demand flexibility trial and more. 

UK and Germany agree new hydrogen partnership 

The UK and German governments have this week announced a new agreement aimed at maximising the development of low carbon and carbon neutral hydrogen projects. The Joint Declaration of Intent will see both countries join forces to bolster the wider development and international trade of hydrogen. 

There are "five pillars of collaboration" within the partnership, which include: 

  • accelerating the deployment of hydrogen projects for industry and consumers; 
  • establishing international leadership on hydrogen markets;  
  • research and innovation on hydrogen, from production to end use; 
  • promoting trade for hydrogen, including goods, technologies and services; and 
  • maximising joint market analysis to support planning and investment opportunities. 

Both governments state that they are confident that this partnership will lay strong foundations for further significant private investment in hydrogen technology and projects. This will stem in part from the partnership maximising key safety standards that can be used internationally which aim to establish reliable, stable markets for sustainable low carbon hydrogen, in particular from renewables. 

Steve Scrimshaw, VP of Siemens Energy UK&I and a member of the UK government’s Hydrogen Advisory Council said: 

"Ramping up the hydrogen economy will take time. Closer cooperation between countries such as the UK and Germany will help accelerate the scale and pace that is needed. The sustainable decarbonisation of industry is unthinkable without renewable hydrogen. That is why partnerships like this are so important." 

Gas demand flexibility trial planned for this winter 

National Gas is planning to pay thousands of domestic and commercial customers to reduce their gas demand this winter. National Gas hinted at these trial flexibility plans in its Winter Outlook Report, its first since being sold by National Grid.  

The scheme is inspired by the success of the electricity system operator's demand flexibility service (DFS) last winter where 1.6 million customers provided 350MW of flexibility. In contrast to the DFS scheme, which was centred around shifting demand outside of two-hour peak windows, gas customers would be required to take part over longer periods of up to several days.  

The Winter Outlook Report predicts similar levels of gas demand in the UK this winter to those experienced in winter 2022, but with lower peak day demands and a halving of gas exports to the European Union. Gas demand for power generation is 16% less than 2022 driven by the growth in renewable energy generation. National Gas emphasises that gas will still need to make up any shortfall in renewable energy generation caused by volatile weather this winter and the options for providing this supply-side flexibility include liquefied natural gas imports, the use of interconnectors and storage.  

Government announces over £13 million in funding for heat network upgrades 

The government has announced that 55 heat network projects will each receive a share of £13.9 million in funding to upgrade their heat networks as part of the first round of awards under the Heat Network Efficiency Scheme. These upgrades should result in lower bills and a more reliable energy supply for the homes and businesses that are connected to these heat networks, as well as reducing emissions.  

Heat networks supply heat to buildings from a central source, bypassing the need for reliance on energy-intensive heating solutions such as gas boilers. The government hopes these improvements to the heat networks will further reduce heat-related emissions and contribute to the UK's carbon reduction commitments. 

24 projects have been awarded a share of £13.2 million to upgrade their heat networks and lower bills for over 4,000 households, whilst a further 31 projects have been granted a share of £667,000 to fund investigations into the required improvements to their heat networks. Recipients include Leeds City Council, which received funding to improve insulation levels in heat networks serving 837 residents. Great Places Housing Association has also been awarded funding to improve the efficiency of Richmond Park heat network in Sheffield.  

Minister for Energy Efficiency and Green Finance, Lord Callanan, stated: "This funding means improvements will be made to old and inefficient heat networks, preventing further breakdowns and ensuring they use less energy. We’re investing millions to build new heat networks, reducing emissions and providing low-cost heating to communities across the country. But it’s equally important we upgrade and maintain existing systems so everyone benefits." 

A government consultation on further improvements to heat networks was also launched in August, and runs until 27 October 2023. 

Energy UK report makes recommendations on maximising energy transition investment  

Energy UK, a trade association for the UK energy industry, has published its Clean Growth Gap: Accelerating Action report in partnership with Oxford Economics. The report is the fifth and final report in the Clean Growth Gap series, and suggests different measures and investment opportunities for the UK in order to maintain its competitiveness in the race to net zero. The publication comes against the backdrop of recent high-profile decisions by the UK government to scale back its climate targets concerning gas boilers and petrol and diesel car sales.  

Energy UK is of the view that the government needs to ensure that it is sending the right signals to the private sector in order to unlock private investment in clean energy technologies The report predicts that every region in the UK would benefit from the transition to net zero and highlights seven policy areas that it thinks the UK should prioritise to encourage private investment. These include: 

  • changing the tax system to recognise the importance of investment in clean energy; 
  • amending the Electricity Generation Levy payable by clean energy producers; 
  • improving the Contracts for Difference regime to reflect current economic realities; and  
  • tackling delays to infrastructure and grid connections. 

Emma Pinchbeck, Energy UK’s chief executive said the focus of the Clean Growth Gap reports has been “on how we can create an environment that builds on our country’s strengths and maximises its attractiveness to investors in a world where there is intensifying competition for this funding".

This article was written with the assistance of Johnny Hartrick, Madeleine Begg, Jack Duffy and Luke Webb 


* 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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