Report: UK falling behind in global low-carbon hydrogen race

That is according to a new report from the Energy Networks Association (ENA) – a trade body representing the UK’s electricity and gas distribution network operators.

The report assesses how attractive national markets for hydrogen generation and infrastructure were in 2021 and how the picture has changed in the past two years thanks to interventions from policymakers.

In 2021, the UK ranked as the second-most attractive market. Only South Korea ranked higher.

While the UK has since doubled its hydrogen production target for 2030 to 10GW, it has not supported this with clear enough interventions designed to make production and other infrastructure cost-effective, the ENA believes.

Now, the UK has dropped to eighth place in the ENA’s ranking. The new global leaders are Germany, the USA and Japan, thanks to new multi-billion-dollar subsidy schemes from central governments.

Also outranking the UK in 2023 are Canada, South Korea, the Netherlands and France.

Fresh funding ideas

Canada unveiled a ‘Made in Canada Plan’ for hydrogen at its most recent Government budget, confirming new funding plus a contracts for difference auction. The EU, meanwhile, has pledged to launch a hydrogen funding “bank” by summer 2024, providing financial support through auctions. This is on top of funding already confirmed through to 2027.

Some EU nations have also set out their own plans, including a €7bn funding pot from Germany to be allocated through to 2030.

In comparison, the ENA is warning, the UK’s pipeline of government-backed hydrogen projects is far smaller – with little in terms of clear signals for growth from Westminster. Clarity has doubtless been hampered by two successive changes in Prime Minister last year.

May 2022 saw the Government launching a new Net-Zero Hydrogen Fund, aimed to support a handful of production projects in reaching operation this decade. The Fund allocates £240m – a far smaller funding pot than that on offer in other nations – for support with upfront investment.

Ministers have also set out a new Business Model based on existing renewable energy auction structures. This will support developers by ensuring a set price range for hydrogen produced. Contracts are set to be awarded to the first tranche of projects later this year, but none have yet reached a final investment decision.

The focus of the Fund and Business model has been on production. Ministers have already been asked several times by bodies including the ENA to set out more strategic plans in terms of storage and transport infrastructure.

Recommendations for change

The ENA’s report concludes that the Government is not acting rapidly enough, nor demonstrating enough flexibility, through the Fund and Business Model.

“Government should take an increased focus on deployment which will deliver scale and subsequent learning, rather than immediate value for money,” says the report, noting that this is the mindset taken by nations such as the US.

These early projects will come with additional risks and considerations regarding supply chain scaling, meaning that the Government should come up with a fresh risk and return case. This would contain a definition of ‘acceptable’ risk levels. At present, only ‘low’ or ‘no’ risk projects gain support.

The report also presses for longer-term clarity on support for other generation projects. Confidence will be lost if the first tranche of projects do not come online in 2025 and the second tranche by 2030, the report notes.

Building on measures to support production, the report concludes, the Government must set a clearer strategic direction on storage and transportation infrastructure. It should also set out which sectors it expects to use hydrogen, and to which timelines.

As the ENA represents gas networks, it is pushing for the Government to make an early decision on the role of hydrogen in home heating before its stated timeline of 2026. It believes a decision could come this year if the matter is prioritized.

The UK Government’s Heat and Buildings Strategy, published in 2021, delayed a formal and strategic decision on the role of hydrogen in domestic heating until 2026 at the earliest.

Ministers stated that time was needed to trial blends and 100% hydrogen for homes in the real world. These trials have faced numerous delays including scrutiny from think tanks and MPs, alongside fierce local opposition and rowing over costs.

Beyond this decision on home heating, the ENA wants to see a full hydrogen transport and storage strategy as soon as feasible. This should be co-developed with input from would-be hydrogen users in sectors such as transport and heavy industry.

This particular call to action echoes recommendations made by MPs on the Transport Committee in recent months.

Summarising the report, the ENA’s head of hydrogen Silvia Simon said: “Policy delays and lack of clarity from government has slowed the progression of low-carbon hydrogen projects. We are still waiting for the Energy Bill to be passed, which was introduced to Parliament over a year ago. The UK has the capability and innovation to be a global hydrogen leader, and we urge the Government to prioritise our recommendations to achieve this.”

The Energy Bill is back in the House of Lords this week following Parliament’s summer recess. Changes are expected to be tabled to unlock onshore wind, accelerate sustainable aviation fuel innovation and, potentially, clamp down on solar on farmland.

Related article: How can Europe super-charge the delivery of its green hydrogen vision?