The launch of the consultation into a green gas levy has set me thinking about the long term future for the costs of gas. Whilst it is true that 36p/MWh levy by 2028 is hardly going to get people very excited, the underlying principle is the more important part of the change. For many years we have got used to green levies being applied to electricity and now are at the point where the costs of the underlying energy are often less than 50% of the total charge. By contrast, gas has almost no non-commodity charges applied to it and this could well be the start of a general trend to fund changes through increased non-commodity gas charges.

We should also think about the long term strategy for decarbonising the heat network. The green gas levy is a step towards the industry self-funding the injection of biomethane into the grid (to the tune of 1% of consumption). However, the potential is much greater, which will need to be paid for. If we are also to move towards a 20% hydrogen blend in the grid, then this will also need to be paid for…watch that 36p/MWh rise and rise!

The disparity between gas and electricity costs at the consumer level have driven business decisions in a way that could be unpalatable in the future. It has got to a point where it can be worth generating electricity in a Combined Heat and Power (CHP) engine with minimal heat use to avoid high mains import costs, clearly, this is not efficient and flies in the face of the principle of good quality CHP. I don’t think the writing is on the wall just yet. However, we are going to have to start thinking about the economics of CHP in the longer term and its place, potentially more as a balancing mechanism, than purely energy cost reduction.

If you would like to talk about this more, please give me a call on 024 7669 8899.