‘Key to triggering investment and buy-in’: Green economy reacts to UK’s Hydrogen Strategy

More than 90% of the hydrogen produced globally each year is fossil-fuel-based

As with many of the Government’s policy packages designed to support accelerated decarbonisation in line with the 2050 net-zero target, the Hydrogen Strategy has faced a string of delays amid the Covid-19 pandemic.  

Its publication today, therefore, has prompted much discussion and debate.

The Strategy builds on the Ten-Point Plan ambition for the UK to host 5GW of low-carbon hydrogen generation by 2030. It has seen the Department for Business, Energy and Industrial Strategy (BEIS) launching consultations on how a new a £240m ‘Net-Zero Hydrogen Fund’ should be allocated; how a new ‘low-carbon’ standard for producers could be drawn up and how a new ‘Hydrogen Business Model’, to be based on the Contracts for Difference (CfD) auction scheme for renewable energy generation, should be laid out.

In total, some £900m of Government funding for the hydrogen sector has been confirmed through the Strategy – some new, some existing. Storage and end-use are considered as well as generation.

All facets of the Strategy are based on BEIS forecasts that 20-35% of the UK’s energy consumption in 2050 could be met with hydrogen. End-user sectors addressed in the Strategy include domestic and business heating, heavy industry, agriculture, road transport, maritime and aviation.

Click here to read edie’s news coverage of the Hydrogen Strategy announcement. 

While the Strategy has been warmly welcomed for providing clarity on the direction of travel ahead of COP26, some green groups and thought leaders have argued that BEIS is looking at the wrong end-user sectors to the wrong extent. There is also debate around the Government’s “twin-track” approach, whereby it is supporting blue hydrogen (produced by splitting natural gas and using man-made technologies to capture a proportion of process emissions) alongside green hydrogen.

Here, edie rounds up the key views from across the UK’s green economy.

National Grid’s hydrogen director Antony Green said:

“The transition to a green economy will require a mix of technologies and hydrogen will play a vital role. This Strategy signals the UK’s commitment to hydrogen and provides the certainty needed to boost consumer and investor confidence and support commercial solutions. Importantly, unlocking the potential of hydrogen as a clean energy solution requires significant pace and innovation to scale up production, and the guidance from the Government today will be key to triggering the investment and buy-in needed to achieve this.”

CBI’s chief policy director Matthew Fell said:

“With hydrogen key to unlocking decarbonisation across carbon-intensive sectors, as well as stimulating high levels of skilled green jobs, the Government’s Hydrogen Strategy is a key milestone in the delivery of the UK’s Ten-Point Plan.   

“As a leader in high skilled manufacturing, and with an extensive legacy in energy production, the UK stands perfectly positioned to capitalise on the opportunities provided by hydrogen.

“As the countdown to COP26 continues, hydrogen is an area where the UK can lead by example on the global stage, showcasing the value of strong partnerships between Government and the private sector on the road to reducing emissions.”

GMB Union’s national secretary Andy Prendergast said:

“GMB welcomes this Strategy as a key step in the development of hydrogen, but we have concerns that the programme is not ambitious enough and will be insufficient for hydrogen development to become a cornerstone of both our energy policy and the transition to net-zero.  

”5GW of low carbon hydrogen production capacity is nowhere near enough – we need to go further and need to be bolder. 

“It’s also a mistake to highlight the so-called ‘success’ of the UK’s offshore wind industry. Turbines and jackets are made overseas, robbing UK manufacturing of much-needed investment and skills.  Our burgeoning hydrogen industry must not make the same mistakes – we must ensure these jobs are on-shored. Hydrogen is crucial to meeting our net-zero targets and crucial for ensuring a proper transition for gas workers.” 

RenewableUK’s chief executing Dan McGrail said:

“While we welcome positive steps like the new Net-Zero Hydrogen Fund, overall, the Strategy doesn’t focus nearly enough on developing the UK’s world-leading green hydrogen industry.

“In the year when the UK is hosting the biggest climate change summit for years, we fear that international investors in renewable hydrogen may compare this strategy to those of other countries and vote with their feet. The Government must use the current consultation period to amend its plans and set out a clear ambition for green hydrogen.

“The UK has the potential to generate vast quantities of renewable hydrogen using clean electricity from offshore wind which can be stored and used whenever it’s needed, providing flexibility to our energy system. Green hydrogen is a clean fuel for sectors that have proved difficult to decarbonise so far, such as shipping and heat for heavy industry.

“We already have a head-start in the global race to scale up the production of renewable hydrogen, with ground-breaking projects in development, such as the Gigastack project in the Humber, and world-class electrolyser manufacturers like ITM Power. We’re urging the Government to set a target of 5GW of renewable hydrogen electrolyser capacity by 2030 as well as setting out a roadmap to get us there, to show greater leadership on tackling climate change”.

The Association for Renewable Energy and Clean Technology’s (REA) director of policy Frank Gordon said:

“This Strategy provides welcome clarity. The REA urged the Government to provide certainty for investors, deliver a technology-neutral approach and highlight the range of low carbon pathways. The Hydrogen Strategy starts to answer those calls and offers a positive vision for the role of hydrogen in meeting the UK’s net-zero ambitions.

“Backed up by the Net-Zero Hydrogen Fund, a revenue support scheme for hydrogen production and a standard methodology to define when hydrogen is low-carbon, we believe this Strategy can provide a stimulus for British-based hydrogen production over the coming years.”

Energy and Climate Intelligence Unit (ECIU) analyst Jess Ralston said:

“A strong hydrogen economy in the UK could cement our place as a green industrial leader if the right action is taken early. The fuel could be very valuable for cleaning up steel production and protecting jobs in this industry – crucial when Europe is already steaming ahead with 23 hydrogen steel plants when we have none. But some questions remain over whether the Government has truly grasped which areas will be most suitable for hydrogen use and which will not.

“For example, the case for hydrogen for home heating is far from proven, particularly hydrogen derived from fossil gas rather than from renewable energy. After all, any remaining fossil gas with a hydrogen blend in the grid is just not compatible with net-zero and it’s not yet clear how effective hydrogen will be, nor how much it will cost.

“The Government should also be alive to the risk of gas industry lobbying causing it to commit too heavily to blue hydrogen and so keeping the country locked into fossil-fuel-based technology, making reaching net-zero more difficult and costly. Instead, focussing on green hydrogen could unlock our full industrial potential, bringing with it lifelong jobs in places like the North East, supporting both the Government’s climate goals and its levelling up ambitions.”

Energy UK’s chief executive Emma Pinchbeck said:

“Hydrogen and carbon capture, utilisation and storage (CCUS) are going to be incredibly valuable for sectors that will be difficult to decarbonise with electricity – and so we welcome that today’s Hydrogen Strategy takes an economy-wide approach to developing these innovative technologies. The UK has real potential for hydrogen and CCUS, both of which can deliver new skilled jobs, particularly in places where the UK already has a proud industrial and energy heritage.”

The Aldersgate Group’s executive director Nick Molho said:

“The Government’s consultation on business models to make large-scale, low-carbon hydrogen production commercially viable and the commitment to develop a credible standard to ensure UK hydrogen production is consistent with the net-zero target are two important steps forward.

“Low-carbon hydrogen has a crucial role to play in cutting emissions in complex sectors of the economy, such as long-range road transport and heavy industry in both clustered and dispersed sites. The key to ramping up production and cutting the cost of low-carbon hydrogen will be to pursue meaningful demonstration projects in sectors such as steel, co-ordinate the deployment of supportive infrastructure, support investment in skills and provide rapid clarity on the market mechanisms industry can rely on to make a predictable return on investment.”  
 
“The Government’s hydrogen production strategy must take into account the fact that different types of hydrogen are at different stages of development. They, therefore, have different requirements in terms of the innovation, infrastructure and policy support they require, with green electrolysis for example needing support to scale up over time from pilot trials initially to large commercial-scale projects. Given the currently limited availability of low-carbon hydrogen, it will be essential that the use of hydrogen is first prioritised towards areas where few low-carbon alternatives exist to cut emissions, such as in heavy industry and long-distance transport.”   

The Conservative Environment Network’s net-zero chamption Alexander Stafford MP said:

“I’m very pleased to see the Hydrogen Strategy, which paves the way for thousands of high-skilled jobs, has been published.”

“I’ve been campaigning with the Conservative Environment Network in support of a mechanism for hydrogen procurement, so I’m very happy to see that included. I’m also pleased to see we will be making our offshore wind sector more efficient, putting excess power to work in hydrogen production rather than the Government having to pay wind farms to switch off.

“There is a lot of pent-up demand from industry who want to get on with the job of scaling up the British hydrogen sector, which will help decarbonise transport, heat, and industrial processes – while helping the UK lead the global race for clean hydrogen.”

Environmental Audit Committee Chairman Philip Dunne MP said:

“I welcome the eagerly awaited Hydrogen Strategy, which finally gives industry some clarity on the Government’s intention for hydrogen in our low-carbon energy mix. When our Committee undertook work on hydrogen last year, we heard that the UK is ahead in terms of technology and understanding, but lacked demand signals from Government through a Hydrogen Strategy required to compete in the global hydrogen economy.  

“While I welcome this step forward, I have to say it is disappointing that only now – after being promised the Strategy in November last year – are the necessary consultations being launched on how to overcome funding issues and how to define ‘low-carbon’ hydrogen. These critical issues should have been ironed out in advance of this Strategy. I urge the Government to act swiftly on the outcomes of these consultations. The UK has a strategic advantage from the prospect of generating green hydrogen from surplus offshore renewable energy generation, but the opportunity should not be missed.

 “Reflecting our calls last year, I welcome the Government’s move to look into the blending of hydrogen into the existing gas supply. While the ‘twin-track’ approach proposed, supporting both green and blue hydrogen production, is positive, it is also important that substantial capacity for carbon capture is developed, so as to avert the release of damaging emissions currently created in blue hydrogen production.”

Bramble Energy’s chief executive officer and chief technical officer Tom Mason said

“Hydrogen is desperately needed as part of the transition to a net-zero economy, these words are not new. But, it must be clean, green and fast.

“The new dedicated UK strategy is an important first step with more needed, and faster if we are to keep pace with the need to decarbonise at the rate other countries and blocs are pushing ahead. The UK shouldn’t lack ambition when it comes to hydrogen especially against our European counterparts when we have more of the resources already in place necessary that should put us ahead not behind in net-zero targets. 

“Emphasis needs to shift towards green hydrogen which, with scale, can displace dirty hydrogen economically, while carbon capture technologies should temporarily provide a quick win in carbon reduction. The UK has some world-leading hydrogen technology businesses and the execution of the full strategy will propel these businesses to compete on a global scale.”

MCS’s chief executive Ian Rippin said:

“MCS does not believe green hydrogen is the solution for heating our homes. Though, we do support the strategic use of green hydrogen in the hard to decarbonise sectors such as transport, shipping, heavy industry and aviation.

“It’s concerning that the strategy cites ambition that hydrogen could replace natural gas in powering around three million UK homes – this won’t be feasible until costs can be significantly reduced below that of natural gas prices today. Using green hydrogen to heat our homes is up to five times more expensive than current natural gas prices, and up to seven times less efficient than using renewable energy to power a heat pump.

“Given the current lack of supporting infrastructure and CCUS facilities, plus the ultimate cost to consumers of adopting a hydrogen-based strategy, we would urge the Government to reconsider. Focusing on hydrogen distracts from retrofitting our homes, potentially diverting huge sums of Government finances to where they are most needed. 

“The Government threw the renewables sector into chaos axing the Green Homes Grant early. Meanwhile, another key support for industry and consumers, the Domestic Renewable Heat Incentive, is due to end in March 2022, with no firm plan for its successor. We’re facing a policy cliff-edge.

“The Government urgently needs to invest in retrofitting our homes and decarbonising heat now, especially given the range of proven zero-carbon solutions currently available to decarbonise our homes. Our national ambition to install 600,000 heat pumps per year by 2028 simply will not be met if the government continues to stutter when an immediate overhaul of our green economy is required.”

GlobalData’s energy transition analyst Barbara Monterrubio said:

“After months of delays, the Hydrogen Strategy will be a welcome boost to support the country’s low-carbon hydrogen potential. However, the Government’s goal of 5GW of low-carbon hydrogen production for 2030 may not position the country as a leader in the sector”.

“The 5GW goal appears relatively achievable, as GlobalData has already tracked the equivalent of 4.6GW in proposed projects, with further early-stage projects potentially adding more capacity to the pipeline. However, this is far behind the Netherlands and Germany, which already have 15GW and 14GW of respective projects in the pipeline. Additionally, the UK target is dwarfed by the EU’s 2030 target of 40GW of low-carbon hydrogen capacity. 

“It would be disappointing for a country with the UK’s high expected growth in offshore wind not to see this translate into a lead in the hydrogen space. The UK is expected to be the top European country in offshore wind capacity over the next decade, with over double the capacity of Germany and almost five times that of the Netherlands. Given that much of the hydrogen capacity build out in Northwest Europe plans to leverage offshore wind energy, a more competitive capacity goal for low-carbon hydrogen could be expected from the UK.”

The Energy Networks Association’s chief executive David Smith said:

“This is a much-needed and welcome first step for the development of the UK’s hydrogen economy. It puts in place the right pieces for Britain’s energy networks to act as the platform on which the UK’s hydrogen ambitions will be built, recognising the importance of hydrogen blending and investing in innovation.

“We need further recognition that for hydrogen to play its part in net-zero; producing 5GW of hydrogen by 2030 will not be enough. We must set our sights higher, towards a figure twice that amount.”

Protium’s founder and chief executive Chris Jackson said:

“It is great to see that the UK Government sees a significant role for hydrogen in the transition to net-zero. Given the current size of the UK energy market, the latest Government estimates for hydrogen to supply between 20%-35% of energy consumption by 2050 would represent a market opportunity worth more than £30bn annualy.

“We also recognise as a positive step the introduction of the additional funding for hydrogen via the Industrial Fuel Switching and Red Diesel Replacement Competitions, both initiatives we think will have a positive impact on the industry and UK green economy.”

“However, while there are components within the UK’s first Hydrogen Strategy that the industry should welcome today, it’s critical to question the Government’s ‘twin-track’ approach. By investing in blue hydrogen, the Government will ensure that the UK is locked into a fuel import strategy, that by design cannot be a net-zero solution and that will channel billions to the largest energy companies on earth instead of supporting and-growing leading UK SMEs.”

“Innovators from the UK have been at the forefront of hydrogen technologies and the UK industry has an enormously exciting opportunity to continue paving the way in this field. While this strategy is not necessarily worse than what we had been hoping to have confirmed by the Government, it has not introduced a long list of upsides and offers little to support the SME space.”

The North West Hydrogen Alliance’s chair Joe Howe said:

“This is a critical step forward for the development of a world-leading hydrogen economy in the UK. While this sends a strong message to industry and investors that hydrogen is an integral part of our low-carbon future, what’s important now is that Government delivers on the Strategy by supporting projects like HyNet North West.

“We particularly welcome the commitment to developing a Hydrogen Sector Development Action Plan to ensure that the huge economic benefits from hydrogen are kept in the UK, supporting our businesses and creating new jobs. If we’re to bring people along with us on this hydrogen revolution, then now’s the time to start raising public awareness of hydrogen and how it can help us reduce our carbon emissions and protect our planet.”

Regen’s energy analyst Grace Millman said:

“Any UK Hydrogen Strategy must be compatible with the UK’s net-zero target and ultimately aim for zero carbon hydrogen. Whilst we therefore welcome the positive commitments to ‘green’ electrolytic hydrogen in the Strategy released today, the Government is also relying heavily on ‘blue’ CCUS-enabled hydrogen to achieve near-term production ambitions.

“We have not yet seen CCUS solutions at scale, nor technology developments that provide sufficient capture efficiencies that would allow CCUS-enabled hydrogen to be compatible with net-zero. It is, therefore, a risk to base the Hydrogen Strategy on the assumed development and availability of CCUS, and the companion consultation on a ‘Low Carbon Hydrogen Standard’ should focus on this as a priority.”  

The Energy and Utilities Alliance’s chief executive Mike Foster said:

“We are enthused to see the Government recognise the role a hydrogen blend into the grid will play in reducing carbon emissions without homeowners needing to change appliances or boilers. It is of great importance that the transition to hydrogen does not cause disruption or large costs to consumers. The blend is a way to significantly reduce emissions with no change, which will in turn leave time for the groundwork to be laid for a seamless switch to 100% hydrogen later on.

“We also welcome Business & Energy Secretary Kwasi Kwarteng’s recognition of hydrogen’s potential for decarbonising heat in homes and commercial buildings across the country.

“Giving consumers choice when it comes to low-carbon heating is vital to ensuring all buildings can be suitably decarbonised to hit targets set out by Government. Research conducted in our recent report Too Close To Home revealed 72% of homeowners supported efforts of UK manufacturers to develop low carbon gas boilers, such as hydrogen boilers. The establishment of a Hydrogen Strategy will be to ensure this consumer sentiment is met, and disruption is limited in the renewable transition.

“The creation of jobs is a welcome aspect of the strategy but will also play a part in the preservation of jobs for the over 120,000 gas engineers working across the UK. Likely requiring only one extra module to be taken on the compulsory Gas Safe engineering qualification, the installation and servicing of hydrogen-ready boilers is set to be very similar to their traditional counterparts. Given heating installers will play an integral role in preparing for the transition should the decision be made in 2026, it is vital that their jobs are protected as part of renewable development.

“We in the heating industry are committed to do all that we can to work with the Government ahead of its decision in 2026 on the role of hydrogen in decarbonising heat. A number of EUA members have been at the forefront of developing hydrogen heating technologies to ease the transition for homeowners and ensure cost to them is no more than with natural gas equivalents. With the establishment of this strategy, UK consumers and businesses have more choice across low-carbon energy mix, an integral part of ensuring no one is left being in the renewable transition.”

BMW Group’s head of hydrogen fuel cell technology and vehicle projects Dr Juergen Guldner said:

“Hydrogen technology is essential for achieving environmental targets at business and country level. BMW Group supports and welcomes the ambition announced by the UK Government in their hydrogen strategy.

“BMW Group is pushing forward with the development of hydrogen fuel cell technology as an additional option for more sustainable driving. Providing hydrogen is produced using renewable energy, and the necessary infrastructure is available, this technology can complement electrification and meet the needs of customers who do not have access to charging points or frequently drive long distances. Hydrogen vehicles’ outstanding long-distance capabilities and fast refuelling offers a high degree of flexibility.

“Two years after unveiling the BMW i Hydrogen NEXT concept car, BMW Group will present the BMW iX5 Hydrogen at the IAA Mobility 2021 in Munich.”

CMS’s partner Dalia Majumder-Russell said:

“The publication of the Hydrogen Strategy is a key plank in moving the discussion from the theoretical aims of the UK achieving net-zero greenhouse gas emissions by 2050 to a more real policy framework, and a target for this decade.

“Clearly, significant work remains ahead – as the strategy recognises with key developments (such as the UK standard for low carbon hydrogen) due to be published later this and next year. Given that hydrogen straddles the regulatory regimes governed through gas and electricity legislation, to name but two, and needs its own framework within which to work.

“At present, the piece-mend approach resembling a’ mend-and-do’ attitude leaves gaps and risks which act as unnecessary hurdles in the development of this sector. Given the role that hydrogen is meant to play in the industrial sector, heating and transport, as well as in electricity grid system management, the need for a holistic review and approach to setting the frameworks within with hydrogen projects can develop and operate is critical to achieving the aims the UK government has set itself. Still, with this publication, the UK joins the 30+ other countries which have hydrogen-specific strategies and this is an important signal of the UK’s commitment to achieving its net-zero greenhouse gas ambitions.”

The UK Hydrogen and Fuel Cell Association’s chief executive Celia Greaves said:

 “We are pleased to see the Government reaffirm its commitment to the hydrogen sector, with analysis suggesting that up to one-third of the UK’s energy consumption by 2050 could be hydrogen-based. We support the twin-track approach, which will help us scale up and decarbonise more quickly.  However, we believe that the Strategy could have been more ambitious. Industry believes that with the right support, a 20GW mix of green and blue hydrogen power could be deployed by 2030. That is four times more than the Government has planned for. 

“Government needs to introduce business models that are attractive and workable for both green and blue hydrogen and reflect their different characteristics. We welcome the publication of the consultation on business models and look forward to working with Government to develop the right initial business models so that both green and blue hydrogen can compete with traditional sources of power and heating. The sooner these models are decided, the quicker investment in generating capacity can be unlocked. This is particularly important if the UK is to hit its interim carbon emissions reduction targets in 2030 and 2035 (a 78% reduction).  Furthermore, without rapid progress, the growing UK hydrogen industry risks falling behind internationally and failing to deliver the significant clean growth that is needed.”

The Nuclear Industry Association’s chief executive Tom Greatrex said: 

“The Strategy confirms that nuclear reactors, large, small, current and advanced, have a critical role in producing low-carbon hydrogen. Nuclear is the only source of energy that can produce clean power and clean heat, making it a vital component as we decarbonise sectors beyond electricity.

“Whether labelled as ‘green’ or ‘low -arbon’, it’s only hydrogen from zero-emissions sources like nuclear and renewables that can make a meaningful long-term impact on decarbonisation. The government must now swiftly implement a new financing model for nuclear to cut costs, move forward with Sizewell C, and continue to support the development of modular reactors, to ensure nuclear is part of a strong low-carbon hydrogen mix.”

KPMG UK’s energy director Wafa Jafri said:

“Given the scale and increasing urgency of the net-zero challenge, it’s critical that the Government executes this strategy well. This will mean offering bold and ambitious leadership ahead of COP26.

“While the plan shows good progress has been made on how to upscale hydrogen production, more pace and thinking are required to understand how this will interact with other equally important parts of the value chain, such as networks, storage and early applications of hydrogen.

“We need to move quickly beyond feasibility studies and trials to ensure tangible progress in areas such as the wide-scale blending of 20% hydrogen into the existing networks, building on the success of recent proven delivery in blending. It will also be crucial to provide a flexible offtake for hydrogen while incrementally decarbonising important sectors such as residential heat.

“Perhaps the single most important aspect of reaching net-zero will be consumer buy-in, particularly in areas that directly affect how we live our lives, like transport and heating. It’s therefore imperative that we find affordable and workable solutions available to large parts of the population while causing the minimum of disruption.”

Green Angel Syndicate’s chief executive Nick Lyth said: 

“There is a real chasm between the ambition expressed in this policy paper and the resource allocation.  It states a figure of £4bn investment over the next 10 years, or £400m annually on average.  In 2019 alone, UK Government spent £10.5bn in support of fossil fuels, according to the European Commission’s report, Energy Prices and Costs in Europe.

“These are very good intentions, but we know what is paved with good intentions, and it’s not real achievements.  These sums of money are disappointing.”

Johnson Matthey’s chief executive Robert MacLeod said: 

“With the publication of the Hydrogen Strategy, the UK has a window of opportunity to establish the world’s first real marketplace for hydrogen and be a world leader. As an early adopter, we can create a new workforce across the country.  There is an opportunity right now to divert the talent coming out of the shrinking oil and gas industry to the hydrogen production of the future – if we delay too long then that window will be missed.

“The UK has been here before and succeeded: in offshore wind power. The UK now has the opportunity to do the same with hydrogen, creating a genuine alternative to carbon-emitting fossil fuels. Both low-carbon blue hydrogen and zero-carbon green hydrogen will be needed to reach net zero. The technology for both is ready now and the UK has several projects ready to proceed which can be world-leading with the right investment. But time is not on our side – we need to act swiftly to combat the climate emergency and learn by doing.”

edie Staff