RIIO-GD/T3: A welcome foundation but more is needed to prepare the gas system for net zero

While this funding will ensure stability, Ofgem’s restriction of low carbon innovation funding will delay progress towards a net zero gas system. Put succinctly, the regulator’s final determination will maintain the status quo, but fails to prepare for the future.

With the lack of policy clarity and certainty on the role of gas within the UK’s low carbon energy system, Ofgem’s cautious approach is understandable.

By reiterating its commitment to flexible regulatory approach, particularly the use of reopeners and uncertainty mechanisms, the regulator has left the option open to update its funding approach in response to key policy decisions on hydrogen blending and the future of hydrogen in domestic heating. Xoserve strongly supports this agility and technologically agnostic approach. In a period of rapid innovation and policy change, the ability to adapt rather than commit prematurely is essential.

Low Carbon Gases

Ofgem has intentionally left a pathway open through the Small Decarbonisation Projects (SDP) re-opener, but only once the HSE safety case for hydrogen blending is concluded and a DESNZ directive is issued. This clarifies that progress on blending is now firmly sequenced behind governmental and safety decisions. At the same time, it is unfortunate to see that innovation funding for hydrogen, hydrogen heating and carbon capture and storage has been removed from the Network Innovation Allowance (NIA). These technologies will play an important role in shaping the future of the gas system, and early innovation is vital to building the evidence base and operational capability required for long-term decarbonisation. While progress of these technologies will continue, the regulator’s decision is expected to slow the pace of implementation of these vital technologies for decarbonising the UK gas system.

On the other hand, we are pleased to see that biomethane innovation remains within NIA funding scope, recognising the growing industry and policymaker support for biogas as a low carbon transition fuel using existing infrastructure. Ofgem’s commitment to supporting a wider range of biomethane projects, including those that do not rely on propane supplementation, is another positive step aligned with Xoserve’s championing of green gases within the UK’s energy transition. Biomethane is one of the clearest, most readily scalable routes to decarbonising the gas system today and strengthening the capacity and consistency of biomethane connections is essential to realising this potential. RIIO-GD3 introduces a dedicated Gas Distribution–specific Biomethane UIOLI allowance, a ring-fenced £20m per GDN pot designed specifically to address network capacity constraints that block new biomethane injections. This includes reinforcement and uprating works, supported by a raised £2m project cap and flexibility to roll funds forward annually. Unlike the Gas Transmission regime, which focuses UIOLI on connection capex gaps, the Gas Distribution approach targets the real bottleneck in the biomethane market: local capacity constraints.

Network decommissioning

RIIO-GD/T3 also makes significant provision for decommissioning activity with the continuation of the Iron Mains Risk Reduction Programme. This work is vital for safety and reduction of methane leaks – its importance cannot be understated. However, beyond these legally mandated programmes, Ofgem has taken a conservative stance on longer-term decommissioning investment, particularly where the future configuration of the gas network remains uncertain. This caution is understandable and aligns with the wider policy uncertainty on the future role of gas infrastructure. However, it also highlights the broader challenge: without clarity on the future role of hydrogen, blending and low-carbon gases, it is becoming increasingly difficult to make strategic, confidence-based decisions about which parts of the network will be repurposed, decommissioned or upgraded for new uses.

Digitisation

For Xoserve, one of the most significant aspects of the Final Determination is the continuation of the network digitalisation licence condition. In parallel, Ofgem has introduced a Digitalisation Re-opener to support flexibility for new digital needs during RIIO-3, enabling investment where projects improve data quality, interoperability and system integration across the gas system.

Preparing the gas system for Net Zero cannot be achieved without accurate, interoperable and accessible data. This commitment ensures the industry continues strengthening its digital foundations, supporting everything from settlement accuracy to whole-system planning. As Britain’s Central Data Service Provider, we welcome this clarity and remain committed to delivering the data and insight that will underpin the next phase of the transition.

Preparing for the future of gas

Ofgem’s RIIO-GD/T3 final determination ultimately provides a stable and necessary foundation. It gives the gas system the resources it needs to remain safe and reliable. It protects vulnerable consumers. And it supports the essential work that keeps the country’s energy supply secure. But stability, while vital, is only one part of what the UK needs. To fully prepare the gas system for Net Zero, future decisions must go further in enabling transformation, not just preservation.

Xoserve stands ready to support this next stage. We will continue working closely with Ofgem, DESNZ and the networks to provide the trusted data, digital capabilities and industry insight required to shape a gas system that is resilient today, while evolving to meet the energy challenges of tomorrow. These decisions imply a greater need for accurate, system-wide biomethane tracking and improved visibility of emerging capacity-constraint areas, areas where Xoserve’s data will play an increasingly central role. Likewise, any future implementation of hydrogen blending would require system and data changes across central processes, meaning Xoserve’s digital capabilities will be critical to ensuring safe and efficient adoption.

RIIO-GD/T3 sets a solid platform. The next steps will determine how effectively the UK turns that platform into a genuinely decarbonisation-ready gas system.