UK’s hopes of boosting hydrogen trade hobbled by Brexit
The UK Hydrogen Strategy, unveiled last week , has many similarities with the EU's own blueprint presented one year before, analysts say. But trade and regulatory cooperation between the two sides is complicated by Brexit, with the UK likely to become a rule-taker at the end of the day.
Although the UK government didn’t make European cooperation a prominent part of its Hydrogen Strategy, the document does make it plain that international trade and cooperation with European partners will be essential to the strategy’s success.
“Working with our North Sea and European neighbours will be key to developing common approaches that will support UK hydrogen investment and facilitate regional trade through interconnectors, pipelines and shared infrastructure,” the UK Strategy states.
Opportunities listed by the UK government include the expansion of “regional value chains” and collaboration with North Sea countries on the “production, storage and transportation” of hydrogen.
“Working with our North Sea and European neighbours on a voluntary basis will be vital to developing approaches that will support UK hydrogen investment and facilitate regional trade, including identifying barriers with regards to cross-border pipeline and shipping trade,” said the UK Department for Business, Energy & Industrial Strategy (BEIS).
“We are also interested in exploring the potential for pan-European dedicated hydrogen transport infrastructure and the use of existing or new gas interconnectors between the UK and Belgium, Netherlands and Ireland which may enable the UK to trade hydrogen or low carbon gas with our neighbours in the future,” a BEIS spokesperson told EURACTIV.
Another key area of cooperation is research and innovation projects carried out under the EU’s €95.5bn Horizon Europe programme, including participation in EU-funded industry partnerships called joint undertakings.
“The UK played a strong role in the Fuel Cells and Hydrogen Joint Undertaking (FCH JU), and will continue to make an active contribution to the Clean Hydrogen Partnership for Europe,” the UK strategy says, referencing EU-funded research and innovation programmes.
However, any kind of bilateral cooperation is inevitably getting more complicated now that Britain has left the European Union.
“The next Joint Undertaking will focus on hydrogen production, distribution and end-use, and according to the UK strategy it is in those areas that the UK is looking for cooperation,” said FCH JU director Bart Biebuyck.
“Under which conditions the UK will be able to participate is subject to the outcome of two discussions that are ongoing at this moment,” he told EURACTIV.
First comes talks to flesh out the details of the UK’s future participation in EU research and innovation programmes, which are currently ongoing. Under the UK-EU trade and cooperation agreement, signed on 30 December, Britain will join Horizon Europe as an associate country, like Switzerland, Norway and 14 other non-EU countries. In exchange, the UK will contribute around €2bn per year to the programme’s budget, according to Science|Business, a specialised news site.
Then, the EU needs to agree on the legal structure for the next joint undertakings, a discussion which Biebuyck said “will be concluded in the coming months”.
“Once both discussions are over we will know more,” he told EURACTIV.
But neither the Commission nor the UK’s BEIS would elaborate on whether there were any meetings planned to discuss the practicalities of EU-UK hydrogen cooperation, including on key issues like trade and the potential development of a joint standard for low-carbon hydrogen.
“We have no immediate comment to the UK strategy itself,” a European Commission spokesperson said. “The international dimension is an integral part of the EU approach,” the spokesperson replied when asked whether talks were scheduled to advance hydrogen trade with the UK.
Despite inevitable divergences caused by Brexit, the UK says cooperation with EU countries remains a priority and continues to take place in other forums than the bloc.
“We are working with our European partners through various multilateral channels, such as Mission Innovation (co-led by the UK and the European Union), the Clean Energy Ministerial Hydrogen Initiative, and the International Partnership for Hydrogen and Fuel Cells in the Economy (IPHE). Through the IPHE we are helping to develop a mutually agreed methodology for determining the greenhouse gas emissions associated with hydrogen production,” a BEIS spokesperson said.
EU is green and UK is blue
Even though the EU and UK have drifted apart after Brexit, analysts say both sides have adopted similar hydrogen strategies, which point to many potential areas of cooperation.
Like the EU blueprint presented a year before, the UK strategy outlines a ‘twin-track’ approach to hydrogen development, including ‘green’ electrolytic and ‘blue’ carbon capture-enabled hydrogen production. Both strategies also aim to establish a standard for low-carbon hydrogen, in line with their net-zero emission objective.
The main difference is on the prioritisation of green versus blue hydrogen, says Jan Rosenow, from the non-profit the Regulatory Assistance Project (RAP).
While the EU strategy clearly puts the emphasis on green hydrogen generated from renewable electricity, “the UK strategy is much more bullish on blue hydrogen” with carbon capture and storage (CCS) to mitigate the emissions, Rosenow told EURACTIV.
Another contentious area is heating. “The EU strategy is much clearer that there is no significant role for hydrogen in the heating sector whereas the UK strategy does not commit itself one way or the other leaving the option open,” Rosenow said.
Otherwise, “for industry, electricity and transport both strategies are pretty well-aligned,” he added.
Gniewomir Flis, an analyst at German think-tank Agora Energiewende, said the UK’s greater emphasis on blue hydrogen leaves more options on the table, which comes “in contrast to exclusive support for renewable hydrogen in EU’s strategy”.
“For instance, by including fossil-based hydrogen with CCS, the UK has an alternative to hydrogen imports during the time it takes to scale a renewable hydrogen industry,” Flis told EURACTIV in emailed comments.
“By relying less on imports, the UK strategy focuses on developing the full hydrogen value chain domestically. This stands in contrast to German hydrogen strategy which is explicit about its need for imports, and which aims to develop a global supply chain,” he said.
And since fossil-based hydrogen with CCS is expected to remain cheaper than renewable hydrogen for the remainder of this decade, this means the UK will need fewer subsidies to support the industry, Flis pointed out.
“At the moment, the total pool of funds available for UK hydrogen is less than €1bn, compared with €9bn in Germany,” Flis remarked.
UK as a rule-taker
Even though the EU has a more restrictive approach than the UK on hydrogen, it has other strengths, first among which is the bloc’s regulatory might underpinned by its huge internal market of 447 million people.
If it wants to import or export hydrogen with Europe, Britain will likely need to follow the EU standard, analysts believe. Brexit will also make the UK’s hydrogen strategy more challenging to deliver on because the EU will develop its own hydrogen policy and regulatory framework, they say.
EU-UK divergences on blue hydrogen could also become a source of tension at some point.
“This could lead to political conflicts between the EU and UK vision and impede on the ability for an integrated hydrogen market across Europe,” said one energy researcher who preferred not to be named.
Frederic Simon, EurActiv.com
This article first appeared on EurActiv.com, an edie content partner
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