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UK Government launches its hydrogen strategy

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Business and Energy Secretary Kwasi Kwarteng has today published the government’s much awaited Hydrogen Strategy.

Building on the £500m commitment to the hydrogen sector, part of Prime Minister Boris Johnson’s ten point plan, the strategy outlines plans to attract £4 billion of private investment and meet government’s ambition for 5GW of low carbon hydrogen production capacity by 2030 – which could replace natural gas in powering around 3 million UK homes each year as well as powering transport and businesses, particularly heavy industry.

A booming, UK-wide hydrogen economy could reportedly be worth £900 million and create over 9,000 high-quality jobs by 2030, potentially rising to 100,000 jobs and worth up to £13 billion by 2050. By 2030, hydrogen could play an important role in decarbonising polluting, energy-intensive industries like chemicals, oil refineries, power and heavy transport like shipping, HGV lorries and trains, by helping these sectors move away from fossil fuels.

With government analysis suggesting that 20-35% of the UK’s energy consumption by 2050 could be hydrogen-based, this new energy source could be critical in meeting our targets of net zero emissions by 2050 and cutting emissions by 78% by 2035 – a view shared by the UK’s independent Climate Change Committee. In the UK, a low-carbon hydrogen economy could deliver emissions savings equivalent to the carbon captured by 700 million trees by 2032 and is a key pillar of capitalising on cleaner energy sources as the UK moves away from fossil fuels.

Business & Energy Secretary Kwasi Kwarteng said:

“Today marks the start of the UK’s hydrogen revolution. This home-grown clean energy source has the potential to transform the way we power our lives and will be essential to tackling climate change and reaching Net Zero.

With the potential to provide a third of the UK’s energy in the future, our strategy positions the UK as first in the global race to ramp up hydrogen technology and seize the thousands of jobs and private investment that come with it.”

Energy & Climate Change Minister Anne-Marie Trevelyan said:

“Today’s strategy sends a strong signal globally that we are committed to building a thriving low carbon hydrogen economy that could deliver hundreds of thousands of high-quality green jobs, helps millions of homes transition to green energy, support our key industrial heartlands to move away from fossil fuels and bring in significant investment.”

As part of the strategy the government has released a public consultation on a preferred business model which, built on a similar premise to the largely successful offshore wind Contracts for Difference scheme (CfDs), is designed to overcome the cost gap between low carbon hydrogen and fossil fuels, helping the costs of low-carbon alternatives to fall quickly. Alongside this, the government is consulting on the design of the £240 million Net Zero Hydrogen Fund, which aims to support the commercial deployment of new production plants across the UK.

Other measures included in the strategy include:

  • a ‘twin track’ approach to supporting multiple technologies including ‘green’ electrolytic and ‘blue’ carbon capture-enabled hydrogen production, and committing to providing further detail in 2022 on the government’s production strategy
  • industry collaboration to develop a UK standard for low carbon hydrogen giving certainty to producers and users that the hydrogen the UK produces is consistent with net zero while supporting the deployment of hydrogen across the country
  • a review to support the development of the necessary network and storage infrastructure to underpin a thriving sector
  • working with industry to assess the safety, technical feasibility, and cost effectiveness of mixing 20% hydrogen into the existing gas supply. Doing so could deliver a 7% emissions reduction on natural gas
  • launching a hydrogen sector development action plan in early 2022 setting out how the government will support companies to secure supply chain opportunities, skills and jobs in hydrogen

The government has also announced a £105 million funding package through its Net Zero Innovation Portfolio, aiming to help industries develop low carbon alternatives for industrial fuels, including hydrogen, which will be key to meeting climate commitments, including:

  • £55 million Industrial Fuel Switching Competition. Funding will support the development and trials of solutions to switch industry from high to low carbon fuels such as natural gas to clean hydrogen, helping industry reach net zero by 2050
  • £40 million Red Diesel Replacement Competition. Providing grant funding for the development and demonstration of low carbon alternatives to diesel for the construction, quarrying and mining sectors, with the aim of decarbonising these industries reliant on red diesel, a fuel used mainly for off-road purposes such as in bulldozers. With red diesel responsible for the production of nearly 14 million tonnes of carbon each year, the investment supports the UK government’s budget announcement removing the entitlement to use red diesel and rebated biodiesel
  • £10 million Industrial Energy Efficiency Accelerator (IEEA). Offering funding to clean technology developers to work with industrial sites to install, test and prove solutions for reducing UK industry’s energy and resource consumption.

This comes as the Transport Secretary unveils the winners of a £2.5 million R&D competition for hydrogen transport pilots in the Tees Valley area, which will lead to supermarkets, emergency services and delivery companies trialling hydrogen-powered transport to move goods and carry out local services.

The strategy has been welcomed by the energy sector, with Frank Gordon, Director of Policy at the REA, saying:

“This Strategy provides welcome clarity. The REA urged the government to provide certainty for investors, deliver a technology neutral approach and highlight the range of low carbon pathways. The Hydrogen Strategy starts to answer those calls and offers a positive vision for the role of hydrogen in meeting the UK’s net zero ambitions.

“Backed up by the Net Zero Hydrogen Fund, a revenue support scheme for hydrogen production and a standard methodology to define when hydrogen is low carbon, we believe this Strategy can provide a stimulus for British-based hydrogen production over the coming years.”

Chief Executive of Energy UK Emma Pinchbeck said:

“Hydrogen and CCUS are going to be incredibly valuable for sectors that will be difficult to decarbonise with electricity – and so we welcome that today’s strategy takes an economy-wide approach to developing these innovative technologies. The UK has real potential for hydrogen and CCUS, both of which can deliver new skilled jobs, particularly in places where the UK already has a proud industrial and energy heritage.”

Hydrogen Director at National Grid Antony Green said:

“The transition to a green economy will require a mix of technologies and hydrogen will play a vital role. This strategy signals the UK’s commitment and provides the certainty needed to boost consumer and investor confidence and support commercial solutions. Importantly, unlocking the potential of hydrogen as a clean energy solution requires significant pace and innovation to scale up production, and the guidance from government today will be key to triggering the investment and buy-in needed to achieve this.”

Helen Melone, Senior Policy Manager at Scottish Renewables, said:

“We welcome the publication of the UK’s first Hydrogen Strategy, positioning the UK as a world leader in a promising growth sector which links renewable energy and net-zero ever more closely.

“It is important that government does not take its eye off the prize here: green hydrogen, made using electrolysis powered by renewables like wind, solar, tidal and more, is set to play a key role in decarbonising the global energy system, and concentrating on developing supply and a market for it now should be governments’ top priority in this area.

“Scotland – the windiest country in Europe – has an exciting role to play and work to deliver this ambitious Strategy should recognise the key role the country will play in realising the UK’s hydrogen economy and net-zero targets.”

Government is working with the Health and Safety Executive and energy regulator Ofgem to support industry in conducting first-of-a-kind heating trials. These trials along with the results of a wider research and development testing programme will lead to a decision in 2026 on the role of hydrogen in decarbonising heat. If a positive case is established, by 2035 hydrogen could be playing a significant role in heating people’s homes and businesses, powering cars, cookers, boilers and more – helping to slash carbon emissions from the UK’s heating system and tackle climate change.

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