UK’s blue hydrogen pipeline grows to 13GW but concerns persist around costs and climate impact
New analysis has revealed that up to 13GW of blue hydrogen projects could come online in the UK by 2030, exceeding the 5GW vision set out by the Government.
The UK’s 2030 hydrogen capacity target was increased from 5GW to 10GW through the Energy Security Strategy earlier this year. Ministers have stated that at least half of new capacity should be for green hydrogen, produced by running water through electrolysers powered by renewable electricity. The remainder will be blue hydrogen, in which traditional natural-gas-fired processes are used but the majority of process emissions are captured using man-made carbon capture and storage (CCS) technologies.
Now, advisory firm Westwood Global Energy Group has released a new analysis revealing that there are blue hydrogen projects with a total capacity of 13GW in the pipeline in the UK, with their developers planning to bring them online by the end of the decade.
Several of the biggest players in the UK’s gas market have outlined plans for blue hydrogen projects. BP is planning the UK’s largest, in Teesside, for example. Elsewhere, Shell and Uniper are collaborating on a project in Lincolnshire.
Westwood states that, while there are more than 20 green hydrogen projects in the UK’s pipeline through to 2030 compared with fewer than 15 blue, the green projects will have smaller capacities individually and collectively. It has information on green hydrogen projects totalling less than 3GW of capacity.
Westwood’s head of energy transition, David Linden, said hydrogen projects are “emerging at an unrivalled price” and that blue hydrogen development is “a necessity” to meet the UK’s 2030 ambitions.
Costs and climate concerns
While blue hydrogen appears easier to scale than green at present in the UK, questions remain about whether it should be considered a low-carbon solution and whether the investment case has changed in light of the fact that wholesale gas prices have skyrocketed over the past year.
On the latter, the Institute for Energy Economics and Financial Analysis (IEEFA) think-tank warned in May that the UK should re-assess the financial case for blue hydrogen with increased gas prices in mind. It has subsequently been stated that the wholesale price of gas in the UK is likely to be three times higher than 2021 levels until at least 2027.
Commenting on Westwood’s findings, IEEFA Europe’s director of energy finance studies Arjun Flora said: “Blue hydrogen was initially touted as a low-cost ‘bridge’ to future electrolytic hydrogen production – but this was based on a low price of gas – historically averaging around 50 pence per Therm, from 2010 to 2020. That argument is no longer valid, as gas prices on the UK NBP spot exchange are at record highs – above 100 pence per Therm since July 2021 and above 400 pence per Therm last month. Prices are expected to remain above pre-pandemic levels for years to come.
“In our May report, we used conservative assumptions to show that expected levelised production costs in the UK were already over a third higher than previously projected by BEIS. I expect it would be even higher today based on the latest data.
“Therefore, while there may well be a large pipeline of announced blue hydrogen projects, it is very hard to see how any of them will progress to more advanced stages of development. For those projects to become economically viable, the global gas situation has to change such that investors have some certainty that gas prices will fall to sufficiently low levels, and quickly enough to avoid too much direct competition with green hydrogen production.”
There are also continued questions about the climate impact of blue hydrogen. Man-made CCS is not yet a commercially mature technology and some early arrays operating in geographies such as the US are not capturing the amount of carbon their designers claimed they would. If technologies do not mature qu ickly enough, investment in blue hydrogen could complicate the UK’s transition to net zero, it has been argued.
Among the organisations taking this line of argument is think-tank E3G. E3G’s senior policy advisor Juliet Phillips told edie that “blue hydrogen, produced using fossil fuels, further weds us to volatile international gas markets”.
“In particular, hydrogen for heating could be a fossil fuel Trojan Horse which could keep consumer bills high, while potentially doing little to reduce carbon emissions,” Phillips said. “Blue hydrogen would only keep households locked into expensive and volatile gas markets. Meanwhile, meaningfully ‘green’ hydrogen is decades away from reaching scale – and is likely to need to be prioritised for heavy industry.”
The UK Government has stated that any hydrogen production badged as ‘low-carbon’ and eligible for state funding as such will need to meet a new standard on life-cycle emissions.
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