5 ways the Hydrogen Strategy can help the UK’s net-zero ambition
The UK Government has unveiled its long-awaited Hydrogen Strategy, outlining how a multi-billion-pound investment into the technology can reduce emissions and create jobs on the road to net-zero. Here, edie looks at five roles that hydrogen could play in delivering rapid decarbonisation.
The UK Government’s Hydrogen Strategy outlines plans to unlock £4bn of investment in blue and green generation, storage and usage this decade.
Building on the initial commitment of £500m to the hydrogen sector made through the Ten Point Plan last year, the Strategy states that, in the best-case scenario, the UK’s hydrogen sector could grow to create 9,000 jobs and attract £4bn of private investment by 2030.
The Strategy details plans for scaling up hydrogen production and consumption domestically and is based on a forecast that some 20-35% of the nation’s energy consumption could be met with hydrogen by 2050.
However, hydrogen as a technology does not come without its critics and concerns. Currently, around 95% of all hydrogen produced globally derives from fossil fuels and hydrogen produced from clean sources is currently two to three times more expensive than traditional methods.
In short, questions have been raised by businesses and green groups as to whether hydrogen can contribute to national decarbonisation efforts without adding to the cost of net-zero, which the Climate Change Committee (CCC) has estimated at around 1% of the UK’s GDP.
So, how does the Government’s Hydrogen Plan attempt to address cost and capacity concerns, and what could it mean for the UK’s private sector, which is desperately searching for ways to decarbonise the heat and transport it relies on? Here, edie rounds up the key talking points.
1) It will attempt to mirror the success of offshore wind
Currently, businesses do not believe the Government is being ambitious enough in efforts to create a “world-leading” hydrogen market, with the commitment of 5GW of green and blue hydrogen by 2030 failing to generate confidence within the private sector.
Taking a nascent industry and turning it into one of the cornerstones of the net-zero transition is no easy task and the Government is hoping to learn from the success of its world-leading offshore wind sector.
Last year, the Government slashed its forecasts for offshore wind energy costs through to 2030 by more than half, in the first update to predictions since 2016. Offshore wind projects which come online between now and 2030 will produce power at an average cost of £47 per megawatt-hour over the course of their lifetime. BEIS’s previous forecast had placed the figure at £103 per megawatt-hour.
In comparison, BEIS is forecasting that the levelised cost of energy (LCOE) for new gas will reach £82 per megawatt-hour by 2030 and that the LCOE for new nuclear will reach £93 per megawatt-hour within the same timeframe.
Offshore wind has received particular policy support from the Conservative Government. While onshore wind, solar and energy storage were effectively banned from competing in the Contracts for Difference (CfD) auctions in 2015, offshore wind projects were still eligible to participate. This decision was only reversed in March 2020.
Between 2016 and 2021 nearly £19bn was invested in offshore wind in the UK, according to RenewableUK and also has the highest cumulative capacity of any nation globally.
In order for hydrogen to mirror offshore wind’s success, the Government is aiming to couple early policy action with strong private sector backing.
While the CfD was critical in lowering the costs of offshore wind, the Government is instead launching a public consultation on a “preferred hydrogen business model” designed to overcome the existing cost gap between hydrogen produced from clean energy sources and fossil fuels.
Under the Business Model, low-carbon hydrogen producers will be protected from volatile wholesale prices by the Government. Increased support costs for customers will also be absorbed by the Government.
2) There will be a place for different kinds of hydrogen technology
The Hydrogen Strategy reiterates the commitments made in the Prime Minister’s Ten Point Plan. Under the Ten Point Plan, the UK will aim to generate 5GW of low-carbon hydrogen production capacity by 2030. Up to £500m will be invested in a bid to create a Hydrogen Neighbourhood in 2023, a Hydrogen Village by 2025 and to create the first town running entirely on hydrogen.
However, the Government is yet to outline what exactly it views as a low-carbon hydrogen source. The current strategy promises to issue a separate plan for hydrogen production, while also publishing a new standard requirement for what hydrogen can be considered “low-carbon” and what cannot next year.
In the meantime, the Government has outlined how a “twin-track” approach will be introduced to support multiple technologies, including green hydrogen – produced by splitting water using electrolysers powered with renewable energy – and blue hydrogen, produced by splitting natural gas and capturing most process emissions with man-made technologies. This approach has proven controversial among green groups, as carbon capture technology is in its relative infancy at a commercial scale. Moreover, blue hydrogen production facilities cannot easily be retrofitted to become green.
As mentioned, there is a cost disparity between different sources of hydrogen, but a flexible approach to the technology is likely to be required in order to reach net-zero.
The National Grid Electricity System Operator (ESO)’s latest Future Energy Scenarios (FES) explores a variety of pathways to reaching net-zero in the UK. Under each scenario, hydrogen is viewed as a crucial technology. Electrolysis – where surplus renewable energy is converted into hydrogen – would increase grid flexibility, while hybrid heat pumps and hydrogen boilers would be used to replace some forms of natural gas.
The key to reaching net-zero will be to outline which hydrogen technologies are truly low-carbon and how policy and financial support can be provided to those with the potential to deliver decarbonisation without costs spiralling out of control.
3) Hydrogen could finally spur progress in heat…
Earlier this year, the Department for Business, Energy & Industrial Strategy (BEIS) published its provisional figures for UK greenhouse gas emissions in 2020. The data shows that carbon emissions fell by 10.7% in 2020 compared to 2019 levels, while total greenhouse gas (GHG) emissions have fallen by almost 9%.
Total GHG emissions were recorded at 48.8% lower than they were in 1990, effectively meaning that the UK is almost halfway to its net-zero target for 2050.
Progress has been driven by the energy sector, which delivered an 11.9% reduction in 2020. However, decarbonisation rates across heat and transport have proved problematic for decades now.
Compared to energy, heat is decarbonising as a snail’s space while still account for around a fifth of the UK’s emissions, rising to 37% of total UK emissions when including industrial processes. Despite more efficient boilers and better insulation being introduced to the UK’s building stock, only 5% of homes currently have low-carbon heating, while around 85% of the UK’s housing stock is heated by natural gas.
The Government believes that hydrogen can be a key enabler of decarbonisation across this sector. The Strategy outlines how hydrogen could replace natural gas in powering around three million UK homes each year.
The Strategy details steps towards supporting hydrogen storage and use. It commits BEIS to reviewing the development support needed to grow the hydrogen storage sector and to trialling 20% hydrogen blends in the existing gas supply. At present, blending is limited to 23%. Beyond this point, infrastructure and appliances will likely need to be upgraded.
The first grid-injected hydrogen blend trials for the UK took place at Keele University last year, following the initial announcement of the project – called HyDeploy – in 2018.
Since then, Northern Gas Networks has begun trialling a 20% hydrogen blend at 670 homes plus a church, school and string of businesses in the village of Winlaton, near Gateshead. It has also opened two show homes in the region that use 100% hydrogen. The UK’s major gas companies have agreed to build on this progress by creating a neighbourhood served by 100% hydrogen by 2023 and a village by 2025.
The Strategy confirms that the Government is working with the Health and Safety Executive and energy regulator Ofgem to support industry to conduct first-of-a-kind hydrogen heating trials. These trials will inform a decision in 2026 as to how hydrogen will be utilised in decarbonising heat. If positive results are achieved, the Government will work to introduce policies that rollout hydrogen technologies across heating for homes and businesses.
4)…And transport too
If progress to decarbonise heat is bad, things are even worse for transport, which overtook power generation to become the UK’s highest-emitting sector in 2016. Indeed, the sector is one of the few in the UK where emissions have been gradually and steadily increasing.
According to Government statistics, territorial carbon emissions from transport in 2020 sat at 97.2 megatonnes, which are 22.5% lower than 1990 levels. While progress has been made, the sector still accounts for 29.8% of the UK’s total emissions.
Last month, the Government’s Transport Decarbonisation Plan outlined how, in terms of timings and technologies, the UK’s highest-emitting sector would be decarbonised. It covers all domestic forms of transport including road, rail, shipping and flights, but international shipping and aviation are not covered.
The plan featured headline commitments to ban the sale of new diesel and petrol heavy goods vehicles (HGVs) and buses and for the government’s own fleet of cars and vans to transition to electric vehicles (EVs) by 2027 instead of 2030.
On hydrogen, the technology will be used to support the delivery of 4,000 new zero-emission buses, while the Government will also support the development of battery and hydrogen trains, which will be used to make diesel trains cleaner until they are removed from the network altogether.
The Hydrogen Strategy builds on these commitments but does not state the proportion of funding intended to go towards hydrogen. These include the Clean Maritime Demonstration Competition, which will receive up to £20m by the end of 2021; the Zero-Emission Bus Regional Areas scheme, which will receive up to £120m by the end of 2021 and the £15m ‘Green Fuels, Green Skies’ competition for sustainable aviation fuels (SAFs).
Overall, the Government believes that a low-carbon hydrogen economy could deliver emissions savings equivalent to the carbon captured by 700 million trees by 2032.
5) Energy-intensive industries look set to benefit
The UK is aiming to deliver the world’s first net-zero emissions industrial zone by 2040, with six locations jostling for the accolade.
The likes of P, Eni, Equinor, Shell and Total have all signed up to spearhead the development of the Net-Zero Teesside project, which focuses heavily on the use of carbon capture, utilisation and storage technology (CCUS).
Elsewhere, Drax, Equinor and National Grid have also published a roadmap fleshing out their plans to create the world’s first zero-carbon industrial hub in the Humber region by 2040. The roadmap sets out proposals to build a demonstration hydrogen production facility in the region by 2025 and install carbon capture equipment on one of the four biomass units at Drax’s power station in Selby two years later.
According to the businesses involved increased investment in CCS and hydrogen is aligned with the Committee on Climate Change’s (CCC) advice for creating a net-zero carbon economy by 2050. The Committee has previously claimed that the two technologies will need to be implemented at scale by 2030, if the UK is to play its part in limiting the global temperature increase to 1.5C.
The Hydrogen Strategy does outline how industries such as chemicals, oil refineries and power look set to benefit from the scaling up of hydrogen production in the UK.
The Government confirmed that £105m in funding from the Net Zero Innovation Portfolio has been made available for hydrogen technology and will prioritise solutions for industrial fuels.
This funding investment will be split. Firstly, £55m has been set aside for the Industrial Fuel Switching Competition to support the development of switching away from natural gas to hydrogen. Secondly, £40m has been issued for the Red Diesel Replacement Competition which provided finance for the development of low-carbon alternatives to diesel use in construction, quarrying and mining. Red diesel is notably used by these sectors for off-road or off-site purposes and is responsible for the production of nearly 14 million tonnes of carbon each year.
Finally, a £10m Industrial Energy Efficiency Accelerator (IEEA) will offer support to industrial sites to install and test ways to use hydrogen to reduce energy and resource consumption.
While the Hydrogen Strategy is the latest welcome policy piece in the UK’s net-zero jigsaw, businesses and green groups will still be seeking more certainty as they strive to decarbonise in alignment with climate science.
Industry has been quick to react to the new flagship strategy, and you can read all the key thoughts of some of the most prominent minds of the green economy here.
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