The UK’s first official Hydrogen Week starts today and aims to bring together stakeholders across the UK to celebrate and promote the role of hydrogen in reaching net zero. In the first of a series of articles, we set out a high-level overview of the opportunities and challenges presented by hydrogen in the UK.
UK Hydrogen Strategy
There is a greater sense of urgency than ever to find a more sustainable, cost-effective, and ethical way to source and store energy. Hydrogen has been hailed by many as a “fuel of the future” that has the potential to help end the world’s dependence on fossil fuels. It is one of a handful of new, low carbon solutions that could be critical for the UK’s transition to net zero.
As a result of its geography, infrastructure and capabilities, the UK has an important opportunity to demonstrate global leadership in low carbon hydrogen. Building hydrogen production and enabling use across multiple sectors will be critical for developing domestic capacity and capabilities, and for securing green jobs across the UK.
Scotland in particular has a key role to play in the development of a UK hydrogen economy, with the potential to produce industrial-scale quantities of hydrogen from offshore and onshore wind resources, wave and tidal power, as well as with carbon capture, usage and storage (CCUS) – supported by a strong company base and valuable skills and assets in oil and gas, offshore wind, and energy systems.
Analysis by the Department for Business, Energy and Industrial Strategy (BEIS) suggests that up to 250-460TWh of hydrogen could be needed in 2050, approximately 20-35% of final energy consumption. Since the UK’s Hydrogen Strategy was originally published, the UK has doubled its low carbon hydrogen production capacity ambition up to 10GW by 2030. The strategy sets out a “twin-track” approach, supporting the production of both electrolytic “green” and CCUS-enabled “blue” hydrogen. There is, however, substantial government work required to achieve this.
In developing a hydrogen economy, the UK Hydrogen Strategy acknowledges the importance of setting clear and consistent direction to give industry and investors confidence and certainty, whilst remaining flexible to ensure there is room to learn from early projects.
BEIS has undertaken significant amounts of policy development on production, including the Net Zero Hydrogen Fund, the Hydrogen Business Model, and the UK Low Carbon Hydrogen Standard. Putting a robust legal framework in place for clean hydrogen is essential for investor confidence. The critical next step, however, is legislation to provide a framework for these models. Additional focus is also required on the “demand” side. Consumers are unlikely to show a willingness to switch to hydrogen unless there is a demonstrably secure supply. Demonstrating that low carbon hydrogen can be produced at scale is a prerequisite for a hydrogen economy.
How is hydrogen produced?
Hydrogen is the most abundant element in the universe, yet pure hydrogen on earth is scarce. It usually exists in compounds which require energy to separate it from other molecules. It can be made from a variety of sources, such as natural gas, nuclear power, and renewable power like solar and wind.
There are four “primary” methods of hydrogen production:
- Green hydrogen is produced via electrolysis to split water into hydrogen and oxygen gas. It is produced with no harmful greenhouse gas emissions and currently makes up a small percentage of the overall hydrogen, because production is expensive.
- Blue hydrogen is produced mainly from natural gas, using a process called steam reforming, which brings together natural gas and heated water in the form of steam. The primary output is hydrogen but also carbon dioxide as a by-product. That means that CCUS is essential to trap and store the carbon.
- Grey hydrogen is the most common form of hydrogen production. It is created from natural gas, or methane, using steam methane reformation but without capturing the greenhouse gases made in the process.
- Brown hydrogen is produced by breaking down carbon-rich fossil fuel (typically coal) using a process called gasification. This process is the simplest and cheapest method using existing technology but is just as environmentally “unfriendly” as fossil fuels.
Strategic challenges
Although costs are likely to reduce significantly and rapidly as innovation and deployment accelerate, current technology and infrastructure limitations make green hydrogen production roughly 10 times more expensive than natural gas production. Beyond cost, the UK Hydrogen Strategy acknowledges that scaling up the use of clean hydrogen presents a number of other strategic challenges.
Need for “first-of-a-kind” investment and deployment. Scaling up a low carbon hydrogen economy will require addressing “first mover advantage” and other barriers to bring forward early projects while establishing a sustainable environment for increasing investment and deployment in the longer term.
Coordinating supply and demand. Developing a hydrogen economy requires overcoming the “chicken and egg” problem of needing to develop new production and use cases in tandem and balancing supply and demand, including potentially through storage.
Technological uncertainty. While some technology is already in use, many applications need to be proven at scale before they can be widely deployed.
Policy and regulatory uncertainty. Hydrogen is a nascent area of energy policy. The energy industry is looking to government to provide capital and revenue support, regulatory levers and incentives, assurance on quality and safety, direction on supply chains and skills, and broader strategic decisions.
Need for enabling infrastructure. The use of hydrogen will require new networks and storage, as well as integration with CCUS, gas and electricity networks.
Collaboration is key
It is clear that continued industry-wide collective effort is required to help realise the potential for low carbon hydrogen. The Hydrogen Strategy sets out a “whole-system approach” roadmap for developing the hydrogen economy, setting out how government and industry must coordinate and deliver activity across the value chain.
In the first half of 2022, the UK Government confirmed its approaches for hydrogen production funding, including consultation responses, and the launch of the first two strands of the Net Zero Hydrogen Fund. The Hydrogen Strategy update renews calls for industry collaboration to ensure that the UK is well positioned to deliver the economic growth, energy security and net zero benefits that hydrogen can unlock. The update is available here.
Clare Jackson, chief executive of Hydrogen UK said: “The UK has an incredible opportunity to become a world leader in low carbon hydrogen, but this will only materialise if government, industry, and the public work together to make this a reality. We hope that UK Hydrogen Week can be a springboard for engaging a greater audience around the incredible benefits of hydrogen in delivering net zero.”
For more information on the topics covered in this article, please contact John Grady, Scott Rodger or Ashley French.