Gas bills are set to rise from next year to pay for upgrades to the gas network that experts argue are unnecessary as the UK transitions away from fossil fuels.
Ministers are being called upon to urgently make decisions on the future of the gas grid to avoid customers paying extra for infrastructure that won’t be needed as Britons start using technology such as heat pumps.
Analysis by one network found the part of gas bills that pays for grid upgrades could increase by over one third to pay for new infrastructure. This would represent a £57 rise – around a seven per cent increase in the total gas bill for the average household from next year.
While some of the upgrades being carried out to the grid are necessary for safety, one expert said some of the work being carried out was equivalent to “gold plating”.
“Gas company shareholders are profiting from government indecision,” Chris Galpin, policy advisor at climate think tank E3G, warned.
The UK will need to stop using natural gas to heat buildings if it is to meet its net zero targets.
It is expected the majority of homes will be warmed using heat pumps or heat networks, which will be powered using electricity from renewable sources such as wind and solar. This would mean much of the gas grid being decommissioned.
One other option for heating homes is hydrogen, which could be transported to homes via the gas grid. However, most experts have ruled out this option due to the high cost and difficulty of producing green hydrogen.
Ministers are yet to make a final decision on the use of hydrogen in homes and in the grid.
What is hydrogen and is it green?
Hydrogen has potential as a green energy source. It can be created from water using electricity and burned in a similar way to oil or gas, but does not release carbon dioxide when burned.
As such, it has been heavily promoted by the fossil fuel industry as a way for the world to reduce carbon emissions while still maintaining much of the existing gas infrastructure we use to heat our homes and power industry.
However, there are major obstacles to using hydrogen at scale. It is incredibly energy intensive to produce hydrogen and the majority of hydrogen in use today is produced using fossil fuels.
So-called ‘green hydrogen’, which is made using renewable electricity, is very expensive and energy intensive to make. As a result, many believe it doesn’t make sense to use hydrogen to power things that can be powered directly by electricity instead, thus cutting out the middle process.
The Committee on Climate Change, which advises the UK Government on net zero, has said it sees “no role for hydrogen in buildings heating and only a very niche, if any, role in surface transport”. Heat pumps and heat networks are viewed as more viable options for heating buildings, while cars and other vehicles will primarily be electric.
Hydrogen’s main role going forward is expected to be in industrial sectors, such as ceramics and chemical production, which are more difficult to electrify.
The idea is to create ‘clusters’ where hydrogen will be transported and stored in order for these industries to access it.
In December last year Labour said it would publish a consultation on hydrogen for heating in 2025, as well as a separate consultation on “blending” hydrogen into parts of the gas grid, which involves mixing hydrogen with natural gas. Neither consultation has been published to date.
This is despite the energy regulator Ofgem urging the Government to make a decision.
Ofgem is currently in the process of approving the five-year business plans submitted by the companies that run Britain’s gas network, which will determine how much they are allowed to increase customer bills by to pay for upgrades to the grid.
The regulator must publish an interim decision in the summer and a final decision by the end of the year, but has warned “strategic uncertainties” around the future of natural gas and hydrogen make it difficult to determine the level of investment required.
Professor Aoife Foley, Chair in Net Zero Infrastructure at the University of Manchester, said “the uncertainty around hydrogen’s role in homes and the grid is already influencing how network companies frame their next investment cycle”.
She said guidance from Ofgem “requires companies to plan across multiple decarbonisation scenarios, but without a clear decision on blending or hydrogen heating, it’s difficult to finalise credible, future-proofed proposals”.
While Ofgem has said it won’t explicitly fund hydrogen-related work until the Government makes its decision, network companies still plan to spend billions replacing the pipes that make up the grid.
This work is part of an ongoing safety programme overseen by the Health and Safety Executive, but companies also boast that the upgrades are making the grid “hydrogen ready” as the newer plastic pipes are more suitable for hydrogen than older iron pipes.
Some experts have raised questions over whether the UK needs to be replacing pipes at the same rate given the diminishing role for the grid.
“We are spending more than we should because we are putting pipes in the ground that last for 100 years at least and the Government targets and industry targets are aiming for decarbonisation for 2050. We’re not expecting to be using lots of gas pipes in 100 years time,” said Dr Richard Lowes, Senior Associate at the Regulatory Assistance Programme.
He said there “hasn’t been a big strategic review” within the last 15 years as to whether the ongoing safety maintenance plans for the grid “make sense” as we transition away from gas.
In their 2026-31 business plans, network companies have outlined proposals to spend funds on hydrogen projects, despite the widespread expectation that the role for hydrogen will be limited as the UK moves towards net zero.
“Until hydrogen heating is ruled out by government, networks will argue that widespread hydrogen heat constitutes a “plausible” future demand scenario and use this to push for additional spending on a more expensive network,” said Galpin.
“This wasteful gold plating would benefit gas network shareholders at the expense of consumers.”
A spokesperson from Future Energy Networks, which represents the network companies, said: “The gas network is a piece of critical national infrastructure and as such needs to be maintained to continue to efficiently deliver gas safely to our customers across the country.”
A spokesperson for the Department for Energy Security and Net Zero said: “The only way to guarantee our energy security and bring down bills for good is by moving towards clean, homegrown power.
“We are assessing the current evidence before consulting this year on the role of hydrogen in home heating, supporting our mission to make the UK a clean energy superpower.”
How much will bills rise by to pay for the gas grid
There are several different components that make up your gas bill. The average annual gas bill can be broken down roughly as follows, according to Ofgem data analysed at the end of last year by the charity Nesta:
Total annual bill: £833
Wholesale costs: £416 (This covers the cost of purchasing gas and goes up or down based on how much you use) Network costs: £158 (This pays for upgrading the grid and varies depending on what region you live in) Operating costs: £125 (This pays for costs undertaken by your energy company such as metering, billing and customer service) Policy costs: £46 (This covers Government programmes such as the Warm Homes Discount and Energy Company Obligation) VAT: £40 Other: £48Ofgem is currently in the process of deciding how much the network element of your gas bill will increase by over the next five years to fund upgrades to the grid. While the exact amount will vary per region, the UK’s largest network company, Cadent, has estimated that this charge will need to increase by £57 (36 per cent) annually from £157 to £214 for their customers.
The reason for this large increase is because Ofgem has taken the decision to reduce the time period over which gas companies are allowed to charge customers for the upgrades to the grid that they are currently making.
Gas networks have typically been allowed to reclaim the cost for a new pipe over a 45 year period. However, this creates a problem as we transition towards net zero as it creates a scenario in which a dwindling gas customer base is being forced to pay increasingly larger costs to pay off upgrades that are being made today.
To counteract this, Ofgem has decided to frontload the amount customers pay now for today’s upgrades, which means larger bills for everyone in the short term.
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