What is the state of play for the UK’s low-carbon hydrogen market?
From ambitious national targets and business trials to a pallet of colours depicting what type of hydrogen can be produced, this nascent and burgeoning technology is being discussed as a viable and potentially transformational way to allow hard-to-decarbonise sectors to reach net-zero. But what will it take to make these visions a reality?
Hydrogen has been touted as one of a plethora of solutions that will be essential in meeting the 1.5C target of the Paris Agreement and reaching net-zero emissions by mid-Century.
It is viewed as an attractive solution for where electrification isn’t applicable, or too complex, namely for carbon-intensive sectors that have hard-to-abate residual emissions. These sectors include chemicals and steel manufacturing, industrial applications and maritime.
While concerns persist as to how hydrogen is produced and whether it is classed as low-carbon, projections suggest that a dramatic scale-up in hydrogen, supported by enabling polices, would be required to meet net-zero.
Here in the UK, a turning point was undoubtedly the Climate Change Committee’s (CCC) first set of recommendations to the Government on legislating for net-zero by 2050, which asserted that hydrogen would be “non-optional” in the transition. Those recommendations were made back in 2019 and three years on, there are still numerous question marks surrounding the role of hydrogen in reaching net-zero.
Hydrogen can be produced from an array of sources, which will predominantly determine how clean and low-carbon that production is, as a result. Hydrogen can be produced from fossil fuels, biomass and water electrolysis that uses electricity. The carbon intensity and environmental by-products that are produced while making hydrogen also depend on what source is being used.
The most common way to produce hydrogen is through natural gas reforming – whereby the carbon atoms of methane and natural gas are split when exposed to high-temperature steam and heat.
Around 95% of the hydrogen produced globally at present is ‘grey’, meaning that it is manufactured using unabated fossil fuels. While hydrogen produces no greenhouse gas emissions at the point of combustion, grey hydrogen cannot be considered a low-carbon solution due to its emissions impact across its lifecycle.
As such, alternative, lower-carbon methods of production will need to scale. Alternative production methods include blue hydrogen (using natural gas and man-made carbon capture technologies); green hydrogen (running water through electrolysers powered by renewable electricity) and pink hydrogen (running water through electrolysers powered by nuclear).
According to research from the UK’s Hydrogen Taskforce, 11.3TWh of hydrogen would be required to support end use in sectors such as heat, transport, power and industry by 2035 annually. However, only 20% of this annual demand would derive from green hydrogen, with the remainder coming from “blue” hydrogen that would include carbon capture utilisation and storage (CCUS) technology.
According to Bloomberg Intelligence, hydrogen is likely to account for 10% of the world’s final energy consumption by 2050. The proportion will be higher in marine transport (50%), road transport (25%) and aviation (25%) than other sectors, with building heating behind the average at just 5%.
Using current technologies, it is not possible to fully electrify container ships, the heaviest road vehicles or passenger planes, but heat pumps – while still not at price parity with gas boilers – do exist. Moreover, by not going all-in on electrification in all sectors, the demand for new infrastructure being placed on electricity grids can be reduced to some extent.
Nonetheless, many companies are making big bets on hydrogen for building heating, including the UK’s five biggest gas grid companies – Cadent, National Grid, Northern Gas Networks, SGN and Wales & West Utilities.
Northern Gas Networks is also participating in the Ofgem-funded ‘H21’ scheme, which is assessing how network infrastructure would need to be upgraded to deliver 100% hydrogen.
At present, the blend is limited to 23% and Northern Gas Networks has trialled 20% to allow what Matthews calls a “buffer”. The firm’s ‘HyDeploy’ project, delivered in partnership with Keele University, Cadent and Progressive Energy, saw a 20% hydrogen blend injected into an existing gas network. It was found that this had no impact on the gas users, paving the way for a public network trial featuring 670 homes and a school.
But while the corporate appetite is there, hydrogen is still a nascent technology, and one that needs to be backed at a government level.
The European Union is targeting 40 GW of renewable hydrogen electrolysers by 2030, while the UK Government recently doubled its target for domestic low-carbon hydrogen production. Just last year, it announced an ambition for the UK to host 5GW of production capacity by 2030, and this was boosted to 10GW through the Energy Security Strategy.
The Strategy confirms plans to hold annual allocation rounds for green hydrogen, using a process similar to the CfD. There is an aim to ensure that up to 1GW of green hydrogen production capacity is in construction or operational by 2025. Scaling green hydrogen production, which is non-existent in the UK at present, will help reduce costs.
Also reiterated are the Hydrogen Strategy’s commitments to launch new business models for hydrogen storage and transportation by 2025, and to develop a hydrogen certification scheme within the same timeframe.
As such, the market is expected to grow exponentially. The market will need to overcome challenges in relation to cost. The European Commission notes that green hydrogen currently costs between about $3/kg and $6.55/kg, compared to $1.80/kg for fossil-derived hydrogen. Blue hydrogen that utilises CCS currently sits at around $2.40/kg. Bloomberg New Energy Finance predicts that the cost of producing green hydrogen will fall by 85% between now and 2050, and will be cheaper that natural gas in most markets at that point.
The UK Government has chosen to support blue and green hydrogen production this decade in a “twin-track” approach, under which at least half of new capacity will need to be green. By some calculations, 75% of the low-carbon hydrogen funding it has provided to date has gone to the blue hydrogen sector.
It is, arguably, here where the biggest concerns exist. Green groups and scientists have been quick to note the complexities of blue hydrogen.
A study published in the journal Energy Science & Engineering by a team of researchers at Cornell University, New York, and Stanford University, California warns that ‘blue’ hydrogen, which is produced by splitting natural gas and capturing process emissions, could generate 20% more emissions over its life-cycle than burning the natural gas in the first instance.
While proponents of blue hydrogen often claim that more than 90% of the emissions resulting from the production process can be addressed using onsite carbon capture and storage (CCS) or carbon capture and utilisation (CCU) arrays, the study states that the capture rate varies from 15% to 90% for facilities currently in commercial operation. The scientists use a base rate in which 85% of emissions are captured.
Moreover, these capture rates are only associated with the carbon dioxide released by the steam methane reforming (SMR) part of the process – the process of heating the methane component of natural gas with steam to produce a mix of carbon monoxide and hydrogen. Methane released in the extraction of natural gas will remain.
Despite these concerns, hydrogen is clearly attracting interest from the business community. During edie’s recent 45-minute online masterclass, more than 700 sustainability and energy professionals registered, with more than 50 questions submitted – more than one per minute.
Some are onboard with the movement. Currently, hydrogen is mostly used for oil refining and fertiliser and chemicals production. However, it has been widely stated by research groups that hydrogen needs to be adopted in sectors where electrification isn’t a viable solution – namely transport and buildings, but also as part of the wider low-carbon power transition.
As such, hydrogen is a suitable alternative for businesses where electrification is too costly or not feasible. This includes those operating in the heavy industry sector that rely on high-temperature heat for furnace and businesses that operate or rely on long-distance and heavy duty transport. Hydrogen has also been touted as a solution to heating buildings.
Others, remain more skeptical. During the masterclass, Centrica’s head of hydrogen William Mezzullo fielded questions on whether blue hydrogen was low-carbon and dispelled some myths around safety concerns. Mezzullo even helped identify opportunities on specific, sector-based businesses cases for hydrogen, ranging from farmers to water companies.
As our post-event write up shows, the stars are yet to fully align on a low-carbon hydrogen economy, but it will be the businesses that start proactively exploring the technology now that could reap the biggest benefits if and when the market does take off.
“This is definitely a time for exploration,” Mezzullo said during the masterclass. “Look at all your energy consumption pathways in your business, meaning not just electricity and heat, but also mobility. Then, you can understand where hydrogen can really work and understand timeframes.”
Centrica Business Solutions sponsored the 45-Minute Masterclass part of their joint Masters series with edie. Also included in this series are: