🇬🇧 How will the regulation of #hydrogen transmission & distribution be in the UK❓
💡 The UK government has published its “Proposals for hydrogen transport and storage business models”, the result of a consultation process
📲 https://lnkd.in/dJnv_zix
📗 Hydrogen transport and storage infrastructure: minded to positions 👉 https://lnkd.in/dwVNvwUX
📘 Hydrogen transport and storage infrastructure: government response to consultation 👉https://lnkd.in/dP56Qs6e
TRANSMISSION
🔹Initial focus for the business model on large-scale pipeline infrastructure
🔹Regulated Asset Base (RAB) ➡️ basis of the business model
🔹External subsidy mechanism to be created alongside a RAB to ensure that charges to users of the pipeline(s) and/or network(s) are not prohibitive, whilst allowing H2 transport providers to make a reasonable return on their investment
🔹External subsidy mechanism to be delivered through private law revenue support contracts between a counterparty and a H2 transport provider receiving the subsidy
🔹The external subsidy mechanism can be used in conjunction with or separately to a RAB
🔹The business model will be designed to be compatible with the future #naturalgas network price control
🔹Strategic planning will form the basis of the allocation process for the business model, and it will help inform the nature and timing of support for early hydrogen transport projects
STORAGE
Unlike transmission, a RAB-based regualtion is not foreseen, and its development won’t be granted to network companies, but competitive 🤔
🔸The model is to provide protection against demand risk (price&volume risk)
🔸Focus primarily on geological storage, optionallity to support above-ground storage where it faces the same market barriers
🔸Single, enduring business model, adaptable to an evolving hydrogen economy favoured
🔸Commercial design: minimum revenue floor for storage providers to sufficiently mitigate demand risk. Incentive ➡️ storage providers allowed to earn more than the floor if they are able to raise revenue from users
🔸Support duration ➡️ at least 15 years
🔸Incentives for facilities to be built on time, with high levels of availability. Profile of capital repayment possibly sculpted across the duration of the contract
🔸Most suitable delivery mechanism ➡️private law contracts between hydrogen storage providers and the subsidy provider (quick implementation + flexibility to support a range of projects)
🔸Commercial context ➡️ initial users of storage could include hydrogen producers, offtakers and/or hydrogen network companies, and in due course intermediaries. Storage pricing to be driven by supply and demand and reflect the long-run marginal costs of storage facilities
🔸Funding: options include funding via a levy or via Exchequer funding. No decision taken on how it will be funded
🔸Allocation of support ➡️ contract negotiated bilaterally between the Department for Energy Security and Net Zero and prospective storage providers.
#HydrogenRegulation
Clean, Green H2 and P2X expert. Sustainability & Innovation Champion Passionate about harnessing digitalisation, revolutionising the skills interface, providing greater learner agency and stimulating extensive engagement
2wGreat to see this call out - hopefully leading to greater streamlined #hydrogenvalleys across Europe.