UK Hydrogen Strategy published, with Government targeting £4bn of private investment by 2030
The UK Government has today (17 August) published its much-awaited Hydrogen Strategy, outlining 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. This is a higher proportion than the global average of 10% forecast by Bloomberg Intelligence.
Detailed in the Strategy is the launch of a £240m ‘Net-Zero Hydrogen Fund’, to be taken from the £1bn Net-Zero Innovation Portfolio that was announced at this year’s Budget. The Department for Business, Energy and Industrial Strategy (BEIS) is consulting as to which projects should be eligible for the new Fund, which will go entirely towards new production plants.
BEIS has stated that it will take a “twin-track” approach, supporting both 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.
Further detail on the “twin-track” plans will be provided early next year in a separate hydrogen sector strategy for production. 2022 will also see the publication of a new standard requirement for what hydrogen can be considered “low-carbon” and what cannot.
Also under consultation by BEIS is a new ‘Hydrogen Business Model’, to be based on the Contracts for Difference (CfD) auction scheme for renewable energy generation. There had been reports that hydrogen production could be adding to the existing CfD scheme but this has not been the case. Nonetheless, the aim of the new Business Model remains the same – to address the cost gap between low-carbon and grey (fossil fuel) hydrogen. 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.
Storage and usage
Aside from generation, 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 which 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 also details measures to increase the uptake of hydrogen in sectors such as heavy industrials, road transport and shipping. As electric heat pumps already exist for buildings, but electrified solutions are not as mature for these sectors, many organisations see hydrogen playing a larger role here than in home heating.
A total of £105m is being provided to would-be hydrogen consumers through the Net-Zero Innovation Portfolio, the Strategy confirms. £55m will go to an Industrial Fuel Switching Competition, supporting trials in industries such as cement and chemicals. £40m will go to a Red Diesel Replacement Competition, funding R&D into specialist equipment such as tractors and bulldozers that run on alternative fuels. Finally, a further £10m will be funnelled into the existing Industrial Energy Efficiency Accelerator (IEEA), as hydrogen should be used in energy-efficient operations to maximise the benefits. £1.7m of this package has gone to delivery partner Carbon Trust.
The Strategy goes on to emphasise several existing decarbonisation schemes for transport 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).
Energy and Climate Change Minister Anne-Marie Trevelyan said: “Today’s Hydrogen Strategy sends a strong signal globally that we are committed to building a thriving low-carbon hydrogen economy that could deliver hundreds of thousands of high-quality green jobs, helps millions of homes transition to green energy, support our key industrial heartlands to move away from fossil fuels and bring in significant investment.”
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