The National Grid sold more of Britain’s Gas Network to foreign investors, just days after Grant Shapps raised questions about plans for using the infrastructure to heat hydrogen.
Macquarie, an Australian investment bank, led a consortium that announced on Wednesday it would exercise its option to purchase another 20 percent of National Gas. This will bring the control of this business to 80 percent.
National Grid, the company that owns the remaining 20%, will receive £700m from the transaction. Macquarie, along with its partners, also hopes to purchase those shares under an option agreement due in the summer of next year.
The deal comes as Britain’s Gas Network is being debated. It currently distributes natural gas to millions of homes, but it will need to find a different purpose with the drive towards “net zero carbon emissions”.
Macquarie National Gas, and other gas network operators, are championing the idea to repurpose the country’s pipes for hydrogen. Hydrogen would be used as a fuel and heat source via “hydrogen-ready” boilers.
It is framed as an opportunity to save money by utilizing existing infrastructure, and saving consumers from needing to purchase expensive heat pumps which run on electricity.
Macquarie’s spokesman stated that hydrogen will be “essential” in helping to decarbonise the UK industry, dispatchable energy, and along with heat pumps, decarbonise home heating.
Critics say that hydrogen is more difficult to transport, more energy intensive to produce, and will need to be used by other sectors, such as transport and heavy industries, before it can be made available to consumers.
Grant Shapps warned last week that he wasn’t “certain” that all home heating would be done with hydrogen.
He warned that switching to hydrogen could mean replacing “potentially quite a bit of piping”, and requiring production of green hydrogen, hydrogen produced using renewable energy.
Experts have argued heat pumps to be a more efficient method of heating millions of homes. However, the public’s adoption of these devices has been slow due to the prohibitive costs.
The industry bosses criticized Mr Shapps comments as “unhelpful”, “inaccurate”
National Gas has launched a nationwide programme, called Project Union, to make the gas pipes in the country compatible with hydrogen.
Chris O’Shea is the CEO of British Gas, which owns Centrica. He warned that excluding hydrogen heating too early could derail the race towards net zero.
Martin Bradley, European Head of Infrastructure for Macquarie Asset Management commented on the National Gas deal: “This extra investment underscores our commitment to National Gas, and the crucial role it plays in the UK energy system.
Since January, we have worked closely with National Gas to continue meeting the energy demands of millions of homes and businesses.
“We are happy to continue our strong partnership with National Grid and aim to acquire the remainder of interest in due time.”
John Pettigrew said, “We are pleased to have reached the next milestone in this project and will continue to work with the consortium.”
National Grid, unlike Macquarie has bet more on electrification than shifting to hydrogen.
It sold its controlling stake in gas transmission last year and spent £7.8bn to buy Western Power Distribution, which is the largest electricity distributor in the country.
Macquarie was the largest infrastructure investor in the world and owned Thames Water – Britain’s largest water provider.
Southern Water is currently owned by Southern Water.