IGEM Policy Brief: Policy asks of our new government

Following last week’s Labour Party victory in the UK General Election, Sir Keir Starmer is now in office, taking his place as the 58^th British Prime Minister. He is one of only four Labour leaders to win a majority; more than doubling the Party’s seats and representing a sizeable majority of 181 votes in the House of Commons.

With the appointment of Starmer’s cabinet ministers now complete, the consistent messaging out of number 10 is that the Government’s priority is to quickly get to work on delivering its election pledges.

One of the government’s five missions is to make the UK a ‘clean energy superpower’. Playing a leading role in realising this mission, Ed Miliband has been appointed as the Secretary of State for Energy Security and Net Zero. Supporting his department’s agenda, Sarah Jones has been appointed as Minister of State in the Department for Energy Security and Net Zero as well as the Department for Business and Trade. Both Miliband and Jones performed the same role within the shadow cabinet, and their appointments echo a similar pattern of continuity across other key roles within the cabinet.

What can the energy sector expect from a Labour government?

The government plans to enact the Energy Independence Act to establish the framework for energy and climate policies. Part of this new legislation is the creation of Great British Energy, a publicly-owned company aimed at driving private investment in clean, home-grown energy. Headquartered in Scotland, Great British Energy will partner with industry and trade unions to co-invest in leading technologies, support capital-intensive projects deploying local energy production, and create jobs and building supply chains across the UK. The government have committed to including draft legislation on Great British Energy into the first King’s Speech on 17 July, at the state opening of the new parliament.

In addition to creating Great British Energy, Ed Miliband outlined his other priorities for the department in a message to his staff following his appointment. These include:

• delivering our mission to boost energy independence and cutting bills through clean power by 2030
• upgrading Britain’s homes and cutting fuel poverty through our Warm Homes Plan
• standing up for consumers by reforming our energy system
• creating good jobs in Britain’s industrial heartlands, including a just transition for the industries based in the North Sea
• leading on international climate action, based on our domestic achievements.

In its election manifesto, the Labour Party announced ambitious plans to achieve a zero-carbon electricity system by 2030, by doubling onshore wind, tripling solar power, and quadrupling offshore wind capacity. As well as implement Local Power Plans to enhance distributed energy production projects. A speech this week by our new Chancellor, Rachel Reeves, demonstrated that the government are moving quickly on their plans by updating the National Planning Policy Framework (NPPF), removing rules that de-facto ban new onshore wind farm projects, with immediate effect.

When it comes to hydrogen, the Party committed to investing in hydrogen, carbon capture and storage and marine energy to support the UK’s long-term energy storage needs. They announced £500 million to support the manufacturing of green hydrogen, and the creation of a National Wealth Fund to directly invest in ports, hydrogen and industrial clusters across the UK.

With regard to home heating, the Labour Party manifesto declared that “nobody will be forced to rip out their boiler”. They also aim to address home energy efficiency upgrades and low carbon heating needs, through the Warm Homes Plan, offering grants, low interest loans and other new private finance solutions.

In terms of gas infrastructure, the Party’s position is to maintain a strategic reserve of gas power stations to meet energy security needs and in terms of new licences for exploring oil and gas fields, they have agreed to deliver on those licences already in progress but not issue any new licences. This indicates that they recognise that there is an ongoing role for oil and gas in our energy mix as we transition to cleaner technologies.

However, despite this recognition, their current plans reflect a long-standing, siloed view of our energy system that fails to reflect the scale of the UK’s reliance on today’s gas system, the integrated nature of domestic and industrial heat across the gas network and the full potential of sustainable gases.

The UK needs a shift in energy strategy from one that is electricity centric, to a more holistic, whole-systems strategy that optimises the inherent flexibility in our gas network. We need to see more detailed plans, demonstrating how the UK will maintain its capacity to meet peak heat demand, balance competing demands for renewable electricity and deliver long-term energy storage.

Our policy asks

IGEM has set out below six key asks for our new government, focusing on gas and electricity systems integration, maximising sustainable gases, developing the net zero workforce, regulation in the gas sector, hydrogen blending and hybrid heating. Delivering on these asks will help deliver a more resilient, efficient, and sustainable energy system as we transition to net zero.

Integration of gas and electricity systems

Ask: Support the development and implementation of a comprehensive ‘whole energy' system strategy for the integration of gas and electricity systems – focusing on practicality, deliverability and least total system cost.

Rationale: The integration of gas and electricity networks is vital for delivering an efficient and resilient net zero energy system. Its design should repurpose existing gas assets and leverage the inherent capability of the gas system to provide large scale energy storage, satisfy peaks in energy demand and deliver the high temperature/speed response requirement for industrial processes.

Effective system integration will enable the optimisation of intermittent renewable energy sources, help balance supply and demand, support energy security and provide flexibility across different decarbonisation pathways, technologies and geographies. Reflecting this interconnectedness across national, regional and local planning will be essential in addressing the unique energy needs and opportunities of different locations.

Our energy system is also part of a complex, interconnected network of infrastructure systems that include sectors such as transport, construction, manufacturing and agriculture. A coordinated, systems approach is needed to achieve a transformation across this infrastructure, in a way which also considers the needs of consumers. An approach echoed in the policy priorities set out by the National Engineering Policy Centre (NEPC).

Actions for government:

• Support the work of the incoming National Energy System Operator (NESO) and its spatial energy planning across electricity, gas and hydrogen, to ensure that a least cost energy system is achieved with sufficient investment across local, regional and national levels.
• Ensure that Local Authorities (LA’s) have the resources to successfully deliver Local Area Energy Plans (LAEPs); developed through both a local and national lens to enable a least cost, efficient energy system.

Maximising sustainable gas

Ask: Introduce robust policies and incentives to accelerate the growth of biomethane in the energy mix.

Rationale: Biomethane is an established technology, with the flexibility for multiple end-uses and provides a low-risk pathway to gas decarbonisation, even with market uncertainty. Biomethane has already provided the UK with significant carbon savings and is actively contributing towards our carbon emissions targets.

Ambitious biomethane production targets will help reduce the UK’s reliance on gas imports and opens up the potential for more hybrid heating systems. IGEM’s industrial connections research shows the scale and potential for biomethane across the UK. At the time of the study, 124 biomethane sites were connected to the gas grid, with 29 further sites in the connections process. The renewable gas capacity from connected sites is 10.1 TWh – enough to heat over 840,000 homes. Including connecting sites, the total capacity will be 14.5 TWh – enough to heat 1.2m homes. A government strategy that maximises the potential for hybrid heating systems, with boilers burning biomethane (used in conjunction with heat pumps powered by renewable electricity), could help heat up to £6m homes – 22% of all homes in the UK.

Currently, much of the valuable green gas produced in anaerobic digestion is immediately burned in gas engines to produce baseload electricity. In an energy system that needs greater efficiencies and significant flexibility, this is an inflexible and inefficient use of this renewable gas. A more effective approach would be to transport green gas in pipes to where it is needed (serving flexible power generation, homes, businesses and vehicle refuelling stations), rather than being burned to generate electricity, when it might not be needed.

Increasing the volume of biomethane in the network provides a no-regrets pathway to greater decarbonisation, without consumers having to make changes to their homes or heating systems.

Actions for government:

• Include biomethane it the government’s energy strategy, introducing a more ambitious biomethane production volume target (currently 30TWh by 2050), that maximises the potential of all feedstocks across the UK.
• Leverage the Green Gas Support Scheme to increase renewable gas injection into the gas grid from existing biogas sites.
• Provide a clear position on the strategic role of biomethane, in advance of the gas network companies submitting their 2026-2031 business plans to Ofgem at the end of 2024. Ensuring that appropriate network investment is made to support biomethane injection will be crucial to the growth and sustainability of the biomethane market – this should be reflected in the regulatory settlements. 
• Take a more active role in supporting the changes needed to the Gas Calculation of Thermal Energy Regulations (GCoTER), to eliminate the use of propane in biomethane injection, support further growth in the market and maximise its contribution towards emissions reduction.
• Support the delivery of an Online CV Modelling feasibility study (as recommended in Cadent’s Future Billing Methodology work), which has the potential to provide one consistent billing methodology to accelerate the benefits of biomethane and hydrogen blending.

Skills for the Net Zero Workforce

Ask: Develop a long-term, comprehensive plan to deliver the diverse and highly skilled net zero workforce that the UK needs.

Rationale: The Climate Change Committee’s (CCC) Net Zero Workforce report indicated that between 135,000 and 725,000 net new jobs could be created by 2030 in low-carbon sectors.^[1] In the energy sector alone, research commissioned by National Grid found that the sector needs hundreds of thousands of people to fill 400,000 roles in the net zero energy workforce by 2050. Of this, 260,000 will be in new roles, while 140,000 will be replacing those who have left the workforce^[2].

This workforce will need to be highly skilled across a range of key areas, including digital and data professionals, scientists, engineers, designers, planners and technicians.

To ensure that the UK can deliver these skills, we need an education and careers system that can respond to changing workforce needs and a holistic plan that reaches across all education levels, invests in upskilling and reskilling the existing workforce and inspires the next generation to want to work in a net zero job role.

Investment in education and training, from the national curriculum through to lifelong learning, will ensure that the UK has the necessary pipeline of talent to drive innovation, deliver net zero and maintain competitiveness in the global market.

Actions for government:

• Deliver a National Engineering and Technology Workforce Strategy^[3] which covers all routes into engineering and technology roles, attracts more teachers and young people to STEM subjects and improves diversity.

• Instigate a full curriculum consultation and review process, to ensure that climate change mitigation and whole energy system solutions are appropriately reflected in the national curriculum.
• Ensure that there is sufficient investment in education and training, including continued support for apprenticeships and lifelong learning.
• Provide clarity on key energy policies that influence industry investment in skills development, to enable businesses to effectively plan and invest in their workforce.

Regulation in the Gas Sector

Ask: Update gas regulations to increase LNG imports and North Sea gas supply, to strengthen UK energy security as we transition to lower carbon sources of energy.

Rationale: The last few years has seen significant volatility and insecurity across the European gas market, the aftermath of which will be felt for many more years to come. As such, the UK needs to develop additional secure gas supplies across its diverse portfolio, as we transition toward a sustainable gas system.

Currently, the Gas Safety (Management) Regulations 1996 restrict the supply of Liquified Natural Gas (LNG) and the supply of natural gas from the North Sea. A change to the gas regulations (raising the upper limit of the Wobbe Index), will allow greater flexibility of LNG imports from a wider market and enable more imports of currently out-of-specification offshore natural gas, without additional processing. 

A review on the impact of widening the Wobbe range, estimated that increasing the upper limit of the Wobbe Index would enable an immediate increase of indigenous gas supplies by five million cubic meters per day.

This change has the capacity to improve energy security, boost competition across the gas market and push gas prices down.

Actions for government:

• Support the initiation of a programme of evidence gathering, required to raise the upper limit of the Wobbe Index in the Gas Safety (Management) Regulations.

Hydrogen Blending

Ask: Support hydrogen blending into the UK gas network as a strategic offtaker, rather than an offtaker of last resort.

Rationale: Hydrogen blending is a beneficial approach to reducing carbon emissions within the gas system. The greater the scale and speed of hydrogen blending implementation, the greater the contribution to cumulative emissions in the lead up to 2050.

Hydrogen blending can also strengthen energy security. Reducing our reliance on fossil fuel gas makes the UK less dependent on natural gas imports and helps mitigate the risks associated with geopolitical instability and supply disruptions.

Building on the government’s announcement in December 2023, to allow hydrogen blending in the GB gas distribution network as an offtaker of last resort, IGEM is calling for hydrogen blending to be prioritised as a strategic offtaker. Treating hydrogen blending as a strategic offtaker will stimulate greater demand for hydrogen and drive the development of a more robust hydrogen market in the UK. Hydrogen producers will be able to sell to those businesses that are not conveniently situated near hydrogen industrial clusters, but still require a hydrogen supply to fully decarbonise.

Prioritising hydrogen blending as a strategic offtaker will lead to economies of scale, cost reductions in hydrogen production, and increased investment in hydrogen technologies, which are essential for long-term energy transition strategies. Allowing blending, only as an offtaker of last resort, limits private investment unnecessarily, delays market growth, and leaves the UK lagging rather than leading.

Following on from the government’s decision on hydrogen blending within the gas distribution network, IGEM hopes to see progress on policy decisions for hydrogen blending in the gas transmission network. Blending into the National Transmission System (NTS) enables the production of hydrogen at scale and ensures producers have a market for the hydrogen they are selling.

Actions for government:

• Reconsider hydrogen blending’s status as a strategic offtaker rather than an offtaker of last resort.
• Publish a timeline/roadmap for a hydrogen blending policy decision for the NTS.
• Mandate that newly installed domestic gas boilers are ‘hydrogen-ready’. Presenting a no-regrets policy that reduces barriers to future decisions on increased hydrogen blends and keeps consumer options open for future home heating technologies. 

Hybrid heating solutions

Ask: Recognise the important role that hybrid heating systems can play, in the deliverability and consumer acceptability of heat decarbonisation.

Rationale: Hybrid heating systems, which combine electric heat pumps powered by renewable electricity, with traditional gas boilers, offer a pragmatic and effective approach to heat decarbonisation in the UK. A position that the Climate Change Committee (CCC) continue to support in their advice to government. They can support a scalable and cost-effective transition, leveraging existing infrastructure while preparing the ground for further advancements in renewable energy integration.

Hybrid heating systems with smart controls can optimise energy use by switching between electricity and gas depending on demand, weather conditions, and energy prices. They can alleviate pressure on the electricity grid by using gas during peak electricity demand times. This enhances grid stability and reliability, particularly during cold spells when heating demand is highest, ensuring a consistent and secure energy supply.

As highlighted in a hybrid heating report published by the Heating & Hot Water Industry Council (HHIC), hybrid heating systems offer a scalable solution that can be deployed across a wide range of building types and regions – particularly beneficial for the UK’s older, harder to decarbonise, housing stock. They provide flexibility in integrating various renewable energy sources, making them adaptable to different local conditions and future energy developments, strategy and policy.

Consumers are faced with limited disruption with the installation of a hybrid heating system. The, sometimes extensive, building retrofit requirements to adopt a heat pump only system, can be seen as a barrier to consumer acceptance. A hybrid system can help consumers switch to lower carbon heating without compromising their comfort and provides them with more time to improve the thermal efficiency of their homes. Also, hybrid systems do not require significant behaviour change compared to heat pumps as a standalone solution.

Actions for government:

• Establish a more prominent role for hybrid heating systems in the government’s Heat & Buildings Strategy.
• Expand the Boiler Upgrade Scheme to provide a grant to households who buy and install a hybrid heating system.