UK’s hydrogen strategy proposal launched
August marked the launch of the government’s ‘plan for a world leading hydrogen economy’. The strategy outlines the main ways in which a hydrogen value chain would contribute to meeting the British government’s 6th Carbon Budget (2033-37) and subsequent targets.
Hydrogen production may account for up to 1/3 of the country’s energy consumption
The ambition to achieve 5 GW of production capacity by 2030 (up to 42 TWh/p.a.) remains in place. At present, hydrogen production in the UK is estimated to stand at around 27 TWh/p.a.. After 2030, it is estimated that growth will increase significantly to 250-460 TWh, and may then represent up to 1/3 of the country’s overall energy consumption.
British hydrogen strategy more tangible
The strategy does not set out a distribution between blue and green hydrogen, but it does stipulate a ‘twin track approach’ in which the best aspects of each technology are to be utilised. This means that the choice between ‘green’ and ‘blue’ should balance long-term potential against the necessity of phasing technology in at an early stage – in order to optimise value to the taxpayer over the long-term. A production strategy for hydrogen is due to be published in early 2022. The British hydrogen strategy is more tangible when compared to Europe. It is also approximately equal in terms of ambition when measured by volume (EU: +40 GW green H2 by 2030, Germany total 90-110 TWh H2 by 2030).
Consultation on different business models
Alongside the strategy, there is also a consultation on various mechanisms (business models) for how the government envisions remunerating industry for the additional costs associated with the establishment for hydrogen value chains. It is assumed that this support will be channelled through producers rather than in the consumer sector. The consultation describes various models for how support of this kind might be organised.
A number of support schemes have been established with a focus on investments throughout the value chain, including storage of hydrogen and CCS.
‘Net Zero Hydrogen Fund’ highlighted
In this context, the ‘Net Zero Hydrogen Fund’, which is worth a total of £240 million, particularly emphasises support for investment in hydrogen production facilities. It is assumed that the first contracts for the supply of low-carbon hydrogen will be operational by early 2023. The use of hydrogen is specifically targeted at industries that cannot easily electrify or where the use of CCS will be particularly costly.
Four areas are highlighted: industry, transportation, power generation, and local heating. It is expected that the hydrogen strategy will deliver reductions in emissions totalling 41 Mt CO2e over ten years from 2023 to 2032, and that it will create a hydrogen economy worth £900 million by 2030.
This is part of the CCS Environmental Analysis for Augusty 2021, prepared by Gassnova's analysis team. Read the whole analysis here.