IGEM response to the Department for Energy Security and Net Zero – Strategy and Policy Statement for Energy Policy in Great Britain: Consultation

Response from the Institution of Gas Engineers & Managers (IGEM) to the Department for Energy Security and Net Zero – Strategy and Policy Statement for Energy Policy in Great Britain: Consultation

Introduction:

Licenced by the Engineering Council, IGEM is the professional engineering institution for gas – representing thousands of engineers, technicians and managers across the UK and overseas, and hundreds of businesses that are a significant part of the emerging hydrogen supply chain.

As advocates of excellence, IGEM’s core aim is to help all those involved with gas to achieve and maintain the highest standards of professional competence. Working with stakeholders from across the industry, we seek to represent the views of our members and the wider gas community and to inform and influence current and future energy policy.  

IGEM fully supports the transition of the energy system to meet a net zero future and are playing a key role in supporting the evidence base, for the application of low carbon gases in the gas network. As well as developing the first Hydrogen Technical Standards, IGEM are facilitating a change in regulations on the quality of gas allowed to be injected into the transmission and distribution network – to enable a higher proportion of greener gases such as biomethane and hydrogen. 

Our role across various industry and governmental groups sees us working directly with gas network companies, manufacturers, consultants, contractors, safety experts, academia, regulators, policy advisors and policy makers, to assess the evidence base and develop informed recommendations on the future of the gas grid.

We welcome the opportunity to respond to this consultation and aim to represent the collective views of IGEM Members and our gas industry stakeholders. 

1. Does the strategy and policy statement identify the most important strategic priorities and policy outcomes for government in formulating policy for the energy sector in Great Britain? If not, please provide details of the priorities that you think should be included. 

There is overall support that the Strategy and Policy Statement broadly reflects the key priorities and outcomes for the UK energy sector, however there is concern that it lacks some clarity and depth, particularly in areas such as whole systems thinking and the application of hydrogen. 

Strategic Priorities – Enabling Clean Energy and Net Zero Infrastructure

It was raised that, although ‘whole systems’ is referenced within the Statement, the examples quoted tend to be electricity only. We encourage that you clearly define that the whole energy system includes electricity, natural gas, hydrogen and heat networks.

Equally, references to ‘network infrastructure’ throughout the Statement should be clear whether it is referring to the electricity networks, the gas networks, storage infrastructure or a combination. 

Diversification of the supply of energy involves much more than a reliance on a single energy vector – electricity. Energy system security would be worsened if the energy system was a single vector, with notable lessons learned in the UK from storm related power outages, which are likely to become more frequent. Diversification of energy using electricity and hydrogen networks will be both a climate change adaptation and mitigation action. We recommend the following edits, highlighted in bold, to better reflect this point:

“Driving the net zero transition to increase and diversify the supply of energy; the transition to net zero compatible alternatives from unabated natural gas is planned and operated in a coherent way; electricity and hydrogen network infrastructure delivered at pace and scale to handle increased capacity as electrification and hydrogen demand grows; competitive and effective markets; regulation which facilitates the anticipatory investment required in clean technology and infrastructure; and seize the economic opportunities of the net zero transition, boosting growth and innovation in green industries.”

Hydrogen should be referenced alongside electricity storage as playing a potentially vital role in long term energy storage.

It was also noted that the Statement should reflect the ongoing need to invest in the maintenance of the existing gas network over the course of its lifespan, to ensure the continued safe and resilient supply of energy as we move away from natural gas, towards greener gases.  

Strategic Priorities – Ensuring Energy Security and Protecting Consumers

This priority statement is sensible, provided that the changes recommended above in the first priority are made.

Strategic Priorities – Ensuring the Energy System is fit for the Future

This priority presents as heavily biased towards the electricity network and raises considerable concern over the perceived lack of understanding the role of the gas network plays today and in the future. A whole systems view is essential, as is the acknowledgement of the role that hydrogen can play in our future energy system. 

We recommend the following edits, highlighted in bold, to better reflect this point:
 
“Energy market design that enables Great Britain to strengthen energy security and meet our decarbonisation targets; delivers the most cost-effective system for consumers across the whole energy system; and supports government’s ambition for Britain to have among the lowest wholesale electricity prices in Europe by 2035 and drive economic growth in the longer term. Coordinated national and local electricity markets which are open to all technologies of all sizes and unlock the full benefits of low carbon flexibility to best meet our net zero targets; economic and efficient digital infrastructure which enables a smart, digital and secure energy system; and effective governance of the energy system during the transition to net zero. Accelerated delivery of world-leading hydrogen production, transportation, storage and demand will open the opportunity for economy-wide utilisation.”

 
Section One: Enabling Clean Energy and Net Zero Infrastructure

Strategic Priorities

This section is lacking in reference to hydrogen infrastructure – the most immediate needs for which are evident across the industrial clusters, and will be essential if the government is to meet its industrial decarbonisation targets. 

Policy Outcomes

This section is missing reference to delivery of new hydrogen infrastructure connecting production with demand. The reference to the connections regime in the last bullet point is supported, but is too narrow. It only considers the route to transfer wind power from the North Sea as electricity, when transferring to consumers as hydrogen may be more speedily deliverable and at lower cost. This connections point ought to be worded in a more whole system way.

The Role of Gas and Hydrogen

Missing from this section is acknowledgement that different demands share the same network – distributed industry, flexible power generation, homes and, increasingly, vehicle refuelling for bus and lorry fleets. We often see different demands being considered on a silo basis, when the reality is that these demands all share the same local gas network infrastructure. 

Section Two: Ensuring Energy Security and Protecting Consumers

Strategic Priorities

We strongly suggest that the issue of public safety is included within the government’s strategic priorities. 

The third bullet point of this section should also reference hydrogen. We recommend the following edits, highlighted in bold, to better reflect this point:

“A retail market that works better for consumers, is more resilient and investable, and supports electrification, fuel switching to hydrogen and the wider transformation of the energy system in the most cost-effective way.”

Section Three: An Energy System Fit for the Future

Flexible and Responsive Markets

When referring to ‘energy smart’ technologies at a domestic level, it may be wise to include reference to hybrid heating systems, alongside standalone heat pumps, since the multi-vector heating system enables electrification of heat but also offers significant energy system demand flexibility.

The Statement refers to ‘achieving the lowest wholesale electricity prices in Europe by 2035’; caution is advised when equating lowest wholesale prices with resilience or cost effectiveness. It has been noted that a resilient energy system will require considerable flexibility and investment in infrastructure to be effective, and will therefore add cost to the system. Having the lowest wholesale prices as an ambition may lead to unintended negative consequences for system flexibility and resilience. 

2. Does the strategy and policy statement effectively set out the role of Ofgem in supporting government to deliver its priorities? If not, please identify where these expectations could be made clearer. 

There is broad support for an energy decarbonisation approach that delivers optionality for consumers and we encourage policy makers not to underestimate the importance of consumer choice. Ofgem (and the FSO) have a key role to play in enabling that process. 

There is support for Ofgem to have a much greater involvement in hydrogen infrastructure development, given its importance for both industrial and power decarbonisation, and as such, consideration should be made to the funding allowance in the next price control mechanism or an alternative option. 

Given the likely decision on hydrogen blending being made this year, we would expect the Statement to make reference to Ofgem establishing the regulatory frameworks required to support the move to delivery. 

There is also a call for the scope of this Statement to include support for a range of hydrogen strategies focused on implementation, rather than just feasibility. Including developing the necessary market framework and codes that enable the hydrogen market to develop. Particularly given that there are active projects that require the policy clarity in the next 5 years.

3. Given the Future System Operator does not exist yet but will need to have regard to the strategy and policy statement once it does, do you consider that we have effectively reflected the Future System Operator’s role in this document? If not, please identify where these expectations could be made clearer. 

Overall, one of the main challenges faced by the FSO is becoming competent with gas system operation today (having negligible experience as the ESO). This is the grounding needed to become competent with strategic hydrogen system planning, delivery and operation. These competencies are necessary for delivering an efficient, flexible system transition that’s cost-effective for the consumer.

Although the focus on onshore and offshore electricity transmission is important, the FSO should consider the interaction of electricity and gas infrastructure so that resilience can be met more effectively and affordably. As an example, the most suitable way to transfer offshore wind power to consumers may be as hydrogen. Distribution Network Operators (DNOs) are already looking to hydrogen through electrolysis to support demand management. We recommend the following edits, highlighted in bold, to better reflect this point:

“Economically efficient and flexible system: As part of ensuring a more flexible, coordinated and economically efficient energy system that meets our decarbonisation targets, the FSO will need to take a strategic approach to network planning that is able to deliver investment ahead of need. When in place, this will initially be delivered via a centralised strategic network plan for electricity transmission onshore and offshore, building on ESO’s current role in holistic network design, and capture alternative vector transportation through hydrogen blending into natural gas and hydrogen pipelines. This should include early consideration of the deliverability, economic cost and environmental and social impacts. As part of this, the FSO should also be considering opportunities to shift and manage demand through smart solutions, such as electricity storage, electrolysis and demand side response.”

There is concern within our membership that the undefined timeframe for the FSO to include hydrogen within its decision making remit, will adversely impact investment in, and implementation of, hydrogen infrastructure development.

It is our view that it should be a priority for the FSO, along with Ofgem, to commence immediate strategic planning for hydrogen infrastructure, to support industrial decarbonisation and industrial cluster development. A point echoed in the CCC’s Progress Report to Parliament 2023, which recommends that “as part of the phased approach to the implementation of the FSO, expanding the remit with respect to hydrogen should be considered as a priority.”

The FSO remit must also include strategic plans for the decarbonisation of heat specifically, which will need a more whole system, consumer centric approach, with clear governance and decision making clarity.
Further clarity is being asked of the relationship between the FSO and Ofgem, including:

• More detail on the outputs of the FSO and how these will be implemented by Ofgem – particularly important given the conflict between net zero investment requirements and the need to keep consumer bills as low as possible.
• Whether the FSO will perform an advisory role only, or whether there is scope for them to be more directive.
• How it will be clearly communicated which FSO’s activities/outputs will be regulated by Ofgem.
• How the government will ensure the FSO has the requisite skills and experience to plan and advise across both gas and electricity development.