UK sets out measures to boost hydrogen and CCS

THE UK Government has put energy at the centre of its legislative agenda as it announced a series of new bills that will impact the rollout of hydrogen projects, CCS, heat networks and its push to achieve net zero emissions.

“My ministers will bring forward an Energy Bill to deliver the transition to cheaper, cleaner, and more secure energy. This will build on the success of the COP26 Summit in Glasgow last year,” said Prince Charles, who in place of The Queen, announced more than 30 laws that the Government wants to pass in the coming year.

The Energy Security Bill will deliver on the commitments of the Energy Security Strategy that the Government outlined last month. This involves producing more oil and gas, doubling its target for hydrogen production to 10 GW by 2030, with at least half produced via electrolysis powered by offshore wind, and approving up to eight new nuclear reactors. The Government aims for its new bill to attract billions in private investment and support tens of thousands of new, skilled jobs across the UK. “Developing carbon capture usage and storage and low carbon hydrogen will create new industries, transforming our former industrial heartlands,” it said.

Among the details published yesterday, the Government says it wants to introduce “state-of-the-art business models” to accelerate the adoption of carbon capture usage and storage, low carbon hydrogen and industrial carbon capture. It did not provide any further detail on this though it is expected that it could repeat the contracts for difference approach that has so successfully scaled up the use of offshore wind. It also announced it will finalise the creation of an Infrastructure Bank that will have £22bn (US$27bn) to fund low-carbon investment and rapidly scale up operations.

“The Bank will provide the long-term policy certainty required to support the growth of key nascent industries, for example carbon capture, usage and storage which encounters many of the same problems experienced by the offshore wind industry in its early days,” the Government’s proposals say.

The bank has already begun making investments, including a £107m loan to the Tees Valley Combined Authority where redevelopment will involve a new GE Renewable Energy site for the manufacture of offshore wind turbines, creating around 800 jobs.

Its proposals mention the need to decarbonise heating, and it will use the new bill to launch a large-scale hydrogen heating trial, create a new market standard and trading scheme to prompt industry to grow the market and reduce the costs of electric heat pumps; and will appoint Ofgem as the new energy regulator for heat networks in a bid to ensure consumers get a reliable supply of heat at a fair price.

It also confirmed earlier proposals to create a Future System Operator that will provide a strategic systems view over both the electricity and gas networks. The Government said in April that an independent body is needed to provide a “whole system” approach to effectively deal with the complexity of the energy transition, including the integration of hydrogen and CCS in the push for net zero emissions.

The Carbon Capture and Storage Association (CCSA) welcomed the measures outlined in the Energy Security Bill though said  it would like to see additional legislative proposals focused on greenhouse gas removal, including direct air capture.

David Smith, CEO of the Energy Networks Association, said: “Today the Government has set out some important steps to deliver a cleaner, more secure and more affordable energy system. While an independent future system operator will help shape our energy system, it’s important that introducing competition into the networks will benefit customers and not hinder progression. Tackling emissions from the way we heat our homes by boosting the market for heat pumps, giving Ofgem powers to regulate heat networks, and enabling the first ever large-scale hydrogen home heating trial are all essential and very welcome.”

He called on the Government to give Ofgem a net zero mandate to help deliver a clean energy system.

A common complaint about the proposals is the lack of measures to reduce demand for energy, such as support for insulation.

Rob Doepel, UK&I Managing Partner for sustainability at EY, said the Government needs an ambitious plan for energy efficiency and called for investments in technologies that can “reduce and remove carbon dioxide already in the atmosphere.”

Simon Virley, Vice Chair and Head of Energy and Natural Resources at KPMG, said: “The measures set out today in the draft Energy Security Bill are all welcome steps to building a low carbon economy over the longer term. But there is nothing in the draft Bill that will help consumers with the cost of living crisis in the short term, or help improve energy efficiency, which is the most cost effective way to permanently reduce energy bills, lower carbon emissions and reduce our dependence on imported oil and gas.”