Comment: Solving the UK hydrogen puzzle

Over the last decade the world seen the emergence of a clear, global consensus that hydrogen will play a key role in the road to net-zero, representing the only viable zero-emissions solution to many hard-to-abate sectors. Renewable electricity sources such as wind and solar are transformational for energy systems but will only get us so far. Hydrogen offers an exciting solution here, and the first-ever UK Hydrogen Week, in partnership with Hydrogen UK, is a testament to that. Hydrogen UK knows that the economic opportunity of hydrogen is substantial – in fact, we estimate that it could generate an additional £18.2 billion in cumulative GVA by 2035.

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The UK is well-placed to make the most of this opportunity, thanks to various factors including its geography and geology. There are few other countries with comparable long-duration storage capacity, given the abundance of geological and salt cavern storage. Globally, this could put the UK in a strong position to be a net-exporter, particularly to the EU in light of RePowerEU targets. Not only does the UK have favourable geographical characteristics, but also valuable expertise in underground hydrogen storage. In fact, the world’s first hydrogen-storage salt caverns were deployed in Teeside in 1972. Hydrogen UK’s Hydrogen Storage report, published last month, found that we have the potential to significantly surpass the 2035 hydrogen storage requirement outlined in the UK Energy Security Strategy.

The UK is home to a world-leading 284,000 km of gas network infrastructure which currently delivers 900 TWh of energy every year via the transportation of natural gas, with the potential to be converted to a sophisticated hydrogen network by 2050. National Gas Transmission’s ‘Project Union’ is planning to connect the UK’s industrial hydrogen & CCUS clusters through a backbone of pipelines, as well as existing interconnectors coming into the Bacton gas terminal in Norfolk, allowing the UK to link with the EU hydrogen backbone. Existing North Sea pipelines can also be re-purposed for hydrogen transportation.

The UK’s location supports an exceptional opportunity for renewable electricity production, which will facilitate ‘green’ electrolytic hydrogen production. The North Sea is considered a world-leading location for wind power, and there are several electrolytic production projects already being developed to take advantage of the opportunity. Furthermore, contrary to popular opinion, the UK is in fact a strong choice of location for solar, with consistent patterns of sunshine that facilitate a predictable and steady supply of power compared to other countries.

The UK has the technical skills that the hydrogen industry will require. The oil and gas industry, which has made a huge contribution to the UK for over sixty years, supports hundreds of thousands of jobs through the supply chain. The vast skills and experience accumulated in the sector will be vital for the future development of hydrogen in the UK, offering a competitive advantage above and beyond competitors.

Put these factors together, and the UK shows incredible promise as a hub for the future of hydrogen - some of the projects in the pipeline are the envy of the world. So, what is the piece of the puzzle which is preventing this from coming to fruition?

It boils down to government policy and the investor confidence it will engender. A clear, and stable, direction of travel from government would secure the UK’s long-term position as a global leader, and we believe there are 3 three key steps which can to be taken to ensure this:

• Scaling production by awarding hydrogen production business model contracts to producers as soon as possible
• Establishing investible market mechanisms to unlock capital investment in systemically important distribution and storage infrastructure, and update the planning and consents regime to speed up their delivery
• Stimulating demand by developing detailed and distinct policy and regulatory frameworks to create markets in end-use sectors (industry, transport, power and heat)

Ultimately, regulatory certainty will help trigger the private sector investment that is needed to progress the industry. Recent legislation in other regions, such as the Inflation Reduction Act in the US and the Green Deal Industrial Plan from the EU, have substantial funding envelopes behind them, and threaten to divert investment away from the UK unless we enact counter measures.

Whilst the UK economy is at risk of losing out on large amounts of capital investment because of this, it would be ill-founded to hastily create a like-for-like copy of these pieces of legislation. The proposed Contracts for Differences model on offer is likely to provide greater value for money than the Inflation Reduction Act but requires a suitable level of ambition and funding envelope to support the nascent hydrogen market. Hydrogen UK is working hard with government and industry to bring this support to life.

Hydrogen UK is lucky to have some fascinating projects amongst its membership, and these are just the tip of the iceberg. Hydrogen Week is a timely reminder of just how far we have come, the scale of the opportunity at hand, and the work that still needs to be done to ensure we realise it.

Brett Ryan is Head of Policy at Hydrogen UK