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The Economics of a Low Carbon Gas Grid

The Economics of a Low Carbon Gas Grid

The Economics of a Low Carbon Gas Grid

On Wednesday 22 February 2017, Carbon Connect ran a roundtable in Parliament entitled “The Economics of a Low Carbon Gas Grid”, chaired by Callum McCaig MP, James Heappey MP, and Dr Alan Whitehead MP. This was the third of three evidence sessions held as part of the research process for the first report in Carbon Connect’s Future Gas Series. This paper has been produced as a follow up to this. While it was informed by the event it does not necessarily represent the views of those in attendance.

Finding 1 The RHI has been successful at encouraging the biomethane market in the UK. However, it is not due to provide support for new schemes after 2021. Signalling an intention to provide support for biomethane beyond 2021 (after the lifetime of the RHI) and ideally clarifying what form this would take could support further deployment of biomethane.

Finding 2 The RHI (or its replacement) could be used to support bioSNG – but it is important to emphasise that this should only be done if there is convincing evidence in the future to suggest that sufficient cost reductions in bioSNG technologies will occur to ensure that this policy instrument delivers affordable decarbonisation. There is ongoing debate as to whether this is likely or not. Given these concerns, it would be appropriate for Government to explore new ways in which it could help encourage bioSNG in a cost-effective manner, which may include a role for local authorities or cross-sectoral funding.

Finding 3 The need to add propane to biogases prior to injection to the grid is, in part, imposed due to how gas bills are currently determined. This is an avoidable economic barrier to their deployment. Billing methodologies should be modified to accommodate low CV sources of gas, such as biomethane and bioSNG, in order to avoid the significant costs associated with adding propane.

Finding 4 Although not yet occurring in the gas distribution system, many of the issues that apply to biogases would also apply to blending hydrogen. Reforming billing methodologies to better accommodate low CV gases such as biomethane and bioSNG would facilitate any potential introduction of hydrogen blending.

Finding 5 If parts of the existing gas grid were to be repurposed from natural gas to 100% hydrogen one of the biggest challenges in this area will be a political decision on a fair and effective way to fund this. This would likely mean a decision between a levy on bills, providing funding through general taxation or a combination of both.