A cost effective option compared to alternatives

The £0.9 billion estimated infrastructure investment and £82 M/annum operating expenditure for HyNet represent a lower cost compared to alternative large scale hydrogen decarbonisation projects, with similar CO2 savings.

This is due to:

  • The concentration of industry in a relatively small geography. This creates consistent demand, avoiding the need for hydrogen storage.
  • Hydrogen blending for homes and businesses means existing domestic appliances do not have to be replaced.
  • Close geographical proximity and timing of depletion of offshore gas fields for CO2 storage and the potential to use existing pipeline assets.

HyNet is a ‘low’ regrets project as the UK explores the pathways to reduce carbon emissions by 2050. This is because it is cost-effective without further extension beyond the initial project scope. It is also low cost for the decarbonisation of heat compared with alternatives, such as electrification.

Funding HyNet

Cadent is exploring a range of options to fund HyNet and learning lessons from other large-scale infrastructure projects, such as Thames Tideway in London. Discussions will take place with UK Government, energy regulator Ofgem and potential partners as Cadent seeks the lowest cost pathway to move this first-of-its-kind decarbonisation project from paper to implementation.

Options include allowing the full project scope under RIIO-2 (2021-2026). RIIO is Ofgem’s performance-based framework to set the price controls for energy networks in the UK. Ofgem is currently consulting with the energy networks about the 2021-2026 RIIO period.

Re-purposing savings from the re-use of the Liverpool Bay oil and gas fields, which could be substantial. Decommissioning costs are estimated at £200-500 million to be split 50/50 between government and industry. These savings could be diverted to support HyNet as the UK’s first CCUS demonstration project.

Initial demonstration projects ahead of 2021 could be funded through various mechanisms. Funding options are explored further in an independent report from Frontier Economics. Read the Executive Summary here.