The Energy Transition | NESO given the go-ahead for regional energy strategic planning in GB

This week we look at NESO's approval for regional energy strategy planning, the UK government's call for evidence on hydrogen to power projects, the National Wealth Fund and NatWest collaboration on social housing retrofits, and more.

Ofgem sets out policy framework for the Regional Energy Strategic Plan to be delivered by NESO

Ofgem published its decision on 2 April on the policy framework of the Regional Energy Strategic Plan (RESP), following a consultation held in July 2024.

Ofgem is introducing the RESP policy framework to "deliver accountability and coordination for strategic planning of the distribution system". The National Energy System Operator (NESO) will be tasked with harmonising national and local energy plans to ensure local areas are provided with the necessary energy infrastructure to meet their own regional goals, while also working towards the overarching national energy plan set out in the Clean Power 2030 Action Plan.

The RESP policy framework sets out Ofgem's decisions on:

• The guiding principles underpinning the RESPs. Ofgem has set out six guiding principles that it says will be crucial to developing a more "coordinated and dynamic approach". These principles are to be whole system, place based, proactive, transparent and collaborative, vision led, and fair.
• Components. A RESP will need five key elements: regional context, short and long-term pathways, spatial context to map pathways against network capacity, identification of areas with regionally significant investment needs, and common planning assumptions.
• Interaction with other forms of planning. RESPs will have a role in setting the direction of the network planning process, as well as requiring that gas and electricity network plans are aligned.
• NESO's delivery. This is expected to be achieved by place-based engagement and support, along with technical coordination.
• Governance structures. Regional strategic boards will provide oversight and steer the introduction and development of RESPs.
• The RESP boundaries. These are set as one in Wales, one in Scotland and nine in England.

Following this decision, Ofgem intends to consult on the methodology for the creation of RESPs and license changes to further clarify the roles of NESO and network companies in developing RESPs and how they  will be integrated into network planning processes, such as NESO's Strategic Spatial Energy Plan and Centralised Strategic Network Plan (due in 2026 and 2027 respectively). Ofgem will support NESO's development of the RESPs, with the first full suite of RESPs to be published in late 2027.

Julian Leslie, director of strategic energy planning and chief engineer at NESO, commented that regional energy strategic plans were a "major milestone" on the path to net zero and meeting future local energy needs. He said: "As the body responsible for developing these plans we will work closely with local stakeholders and gas and electricity networks, to ensure that local communities play a central role in planning how they decarbonise and how their contributions support national strategic energy planning."

UK government calls for evidence on hydrogen-to-power projects

The Department for Energy Security and Net Zero (DESNZ) on 31 March opened a call for technical evidence on hydrogen-to-power (H2P) projects that can deliver by 2030 ahead of enabling hydrogen infrastructure. The information will help the government consider the value, options and risks of this technology and will guide strategies to roll out dispatchable power in order to accelerate to net zero and achieve clean power by 2030.

H2P is the generation of low-carbon electricity from low-carbon hydrogen. It is expected to play a critical role in the future electricity system, primarily by balancing the system and reducing reliance on unabated gas. H2P can provide low carbon dispatchable generation, which makes it critical in meeting the projected 40-50GW of demand for dispatchable and long-duration flexible technologies in 2030.

The government acknowledges that delivering first-of-a-kind H2P by the 2030 deadline may require constraints or adaptation of characteristics of the plant (for example, scale and configuration), as result of factors like the availability of hydrogen, financing and technologies. The government is seeking input from stakeholders on technical evidence for innovative H2P projects capable of delivering by 2030; in particular, those that can deliver electricity generation from 100% low-carbon hydrogen at sufficient scale to "provide beneficial learning" for future projects.

DESNZ is also asking for market views on the role of the public sector in creating an environment that accelerates the delivery of early HP2 initiatives.

The HP2 consultation is aimed at the energy industry and project developers with existing plans for UK-based H2P projects of a sufficient size. The call for evidence closes for submissions on 12 May.

National Wealth Fund announces funding for social housing retrofit

The National Wealth Fund (NWF) and NatWest Group have announced plans for a partnership to unlock £400 million in investment to support the decarbonisation and energy efficiency of existing social housing. The loans will be used to help registered providers of social housing reduce energy consumption via the installation of energy-efficient heating, insulation, renewable energy generation, ventilation and heating controls.

The NWF will guarantee 80% of each retrofit loan provided by NatWest up to a total commitment of £400 million. The intention is to inject private sector money into the social housing sector and remove barriers to deployment of funds by increasing access to financing.

The partnership brings the NWF's investment to date in social housing retrofit to a total of £1.3billion. It also forms part of the Warm Homes Plan, which recently allocated £1.8 billion to local authorities and social housing providers to deliver solar panels and heat pumps to save energy costs in homes.

John Flint, CEO of the NWF, said: "Everyone should be able to live in a warm home with affordable energy bills. However, the scale of the retrofit challenge facing the social housing sector is clear and significant investment is needed now to ensure that residents across the UK have homes fit for the future."

Ofgem set to approve £71m boost for hydrogen infrastructure in the East Coast cluster

Ofgem has published its consultation on the Front End Engineering Design RIIO-2 funding applications for four hydrogen network schemes.

This consultation response is composed of draft determinations made in response to funding applications submitted by the projects as part of a "reopener" mechanism available under the second network price control or RIIO-2. The reopener, known as the Net Zero and Sustainability Assessment Programme, allows gas network owners to seek recovery of additional capital for early design work on projects with a net zero focus.

Subject to consultation responses, Ofgem will approve £71 million (out of a requested £132 million) to develop three of the four projects proposed by Cadent, Northern Gas Networks and National Gas Transmission, which form part of the East Coast hydrogen cluster.

Ofgem's decisions were based on various factors, including the ability to connect hydrogen supplies to local energy-intensive industries, the ability to repurpose existing assets, local readiness to develop a hydrogen network and value to consumers.

The draft determinations will form a critical part of evidence subsequently submitted to DESNZ to seek funding for the final project. The consultation closes on 25 April 2025, after which Ofgem will publish its final decision.

UK sets a new solar generation record

NESO has confirmed that, for a half-hour period on 1 April, solar generation provided 12.2GW to the grid, which is a solar generation record for the UK. The record is expected to be broken repeatedly over the next months as more solar projects come online.

The record follows the DESNZ publication of energy trends for March, which confirmed that renewables accounted for more than half of the total power generation in the UK across the year for the first time, with fossil fuel generation plunging to levels not seen since the 1950s.

This article was written with the assistance of Ellie Smyk and Imogen Drummond trainee solicitors, Sumaiya Hafiza, solicitor apprentice, and Tomi Agbonifo, paralegal.