June 2020 - Adveco Ltd.

Decarbonisation of gas supplies is seen as a necessary step towards meeting the UK’s carbon reduction targets, including the net zero greenhouse gas emissions target by 2050. A new round of consultation from the Department for Business, Energy and Industrial Strategy (BEIS) has laid out a structural proposal, the Green Gas Support Scheme, to be funded by a Green Gas Levy to increase the proportion of biomethane injection in the grid.

The intent of the consultation is to put in place the necessary mechanism “as soon as is practicable”, with the intent of launching the scheme within the year. The scheme would operate through to the financial year 2025-26, but initially, only support biomethane as this currently is the only green gas commercially produced in the UK. Crucially, the consultation recognises that to further decarbonise the gas grid, there is a need to widen support to other potential green gases in the longer term. This is important as it opens the door to further consultation on the strong potential of hydrogen blending to meet the more widespread demands for an alternative, green gas that can take full advantage of the highly effective infrastructure already in place to deliver gas to properties, both commercial and domestic, throughout the country.

As biomethane is produced from biomass, it is considered renewable and can offer significant carbon savings when compared with natural gas. The Committee on Climate Change (CCC) consider the production of biomethane from waste as a low-regrets option and recommend continued government support.

To date, biomethane has been supported by the Non-Domestic RHI. As funding commitment to new projects ceases in March 2021, the Green Gas Support Scheme is intended to provide new investment for the industry, enabling the development of new production plants in order to encourage an increase in the proportion of green gas in the gas grid. The proposed tariff mechanism should help address the significant ongoing operating costs of plants. Additionally, as the payments are to be directly related to the specific volumes of biomethane injection, it will continue to incentivise ongoing biomethane production after the capital costs are paid off.

A major facet of the current consultation phase is intended to ratify a robust cost control framework to ensure that costs do not rise unexpectedly, damaging the value of any investment in the technology. It is believed that by driving investment into this sector, biomethane production will see an uplift, along with a reduction in production cost as plants are sized optimally based on individual characteristics and feedstock availability.

Looking beyond this scheme, focus must expand to recognise the value and importance of hydrogen in the mid to long term as the defacto choice for green gas delivery at scale. That means actively supporting hydrogen production through the Green Gas Support Scheme, or its successors. Given that blending small proportions into the natural gas supply and deployment within industry would not initially require major infrastructure changes, the use of hydrogen is truly advantageous.

We recognise that hydrogen is expected to play a valuable role in meeting the needs for heating the UK’s commercial buildings but will never be a 100% solution. This is why deployment in combination with heat pumps as part of a ‘hybrid system’ remains the best, and most cost-effective to deploy and operate method for commercial organisations to decarbonise operations and drive a low carbon economy.

Whether the ongoing consultation on green gas and low and high-temperature appliances decides to recognise the importance of ‘hybrids’ with financial support, the simple truth is that for the wide majority of commercial organisations looking to refurbish, capital investment and operational costs for heating and cooling systems are a critical decision factor. Hybrid systems offer the best option now and in the longer term as new Green Gas options come into play. It would, therefore, be greatly advantageous for the Government to recognise and support technologies that advance low carbon adoption now and support retention of existing infrastructure that would prove critical for the deployment of next-generation long term green technology.

The Department for Business, Energy and Industrial Strategy (BEIS) has confirmed that the non-domestic Renewable Heat Incentive (RHI) is to close to new applicants on 31 March 2021. This has led to the launch of consultation for the “Future support for low carbon heat” which details the proposals for support mechanisms following the closure of the scheme.

Replacing the RHI’s tariff-based support is the £4,000 Clean Heat Grant set at a flat rate as opposed to scaling with system size or changing across technology types. The intent is to drive businesses to find which technology is the most cost-effective for their property and address the barrier of upfront costs.

BEIS has indicated it believes the majority of applications will be for air-source heat pumps (ASHP). The Government is proposing to support both low and high-temperature units, where installations provide space and water heating in buildings, but not ‘hybrids’ installed alongside a fossil fuel system.

As part of the consultation process, the Government continues to consider the role that gas/electric hybrid systems may play in the longer-term decarbonisation of the gas grid, noting recommendations relating to Hydrogen in a low carbon economy. Under this scenario, widespread deployment of hybrid systems help to retain the long-term value of the gas grid to the energy system, while enabling near-term reductions in carbon emissions.

Adveco can support commercial businesses wishing to design new low carbon systems featuring ASHPs. The FPi range of commercial Air Source Heat Pumps (ASHP), for example, delivers an easy to install method for commercial sites to achieve lower cost water heating or cooling. With sleek looks and quiet operation, the compact monobloc design is capable of providing domestic hot water (DHW) at up to 55°C, or cool water to -7°C for use in fan coils. The FPi range is able to achieve an above-average coefficient of performance (COP). Ranging up to a very high COP of 4.7, FPi ASHPs can make a real impact on a property’s energy consumption.

The initial response to the announcement has been mixed, especially regarding the lack of extension of the non-domestic RHI and the instigation of a cap on the future grant scheme. More importantly, for many commercial sites, ASHP will not be enough in isolation, so you need to understand the limitations and why combining with other technologies and controls to create a hybrid system is a necessity. The hybrid approach also offers better compatibility with existing DHW distribution systems and the demands of higher thermal requirements, providing the versatility to reduce operational costs while maintaining the higher water temperatures demanded by commercial DHW operations. A hybrid system built around Adveco’s FPi can help businesses meet their carbon targets in the coming decade while keeping running costs low and should not, it is hoped, be summarily dismissed from the Clean Heat Grant. Exclusion could have a damaging effect on the decision by commercial properties to refurbish systems to be more environmentally friendly if costs become prohibitive without financial support from the Government.

BEIS will retain the right to review the grant levels in response to market changes or “if uptake falls substantially outside the expected range”. Funding for the Clean Heat Grant has been committed for two years to March 2024, after which the scheme will close to new applications.

The Clean Heat Grant consultation closes on 7 July 2020. Read the latest on the consultation process.

For further information on using renewables at your commercial project, get in touch with Adveco.

We design, build and install a wide range of commercial Air Source Heat Pumps (ASHP).

The Route to a Green Grid

Clean Heat Grant to Replace the Renewable Heat Incentive