Posted on 17 Aug 2021
The UK will pursue a technology-neutral approach to develop 5-GW of low-carbon hydrogen by 2030 in its much-anticipated Hydrogen Strategy, but said details on market mechanisms and carbon intensity definitions to support it would wait until 2022.
The strategy, published Aug. 17, supports both renewable "green" production by electrolysis of water as well as fossil fuel-derived "blue" production with carbon capture and storage as it seeks to build capacity this decade.
The market model to support the establishment of a low-carbon hydrogen economy would likely draw on the success of contracts for difference in the offshore wind sector, the Department for Business, Energy and Industrial Strategy (BEIS) said in a statement.
"The government has today launched a public consultation on a preferred hydrogen business model which, built on a similar premise to the offshore wind 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, as hydrogen comes to play an increasing role in our lives," it said.
BEIS said it would give further detail on its hydrogen production strategy and business model in 2022, and was developing a standard for low-carbon hydrogen in collaboration with industry.
The government would also consult with industry on how to structure its GBP240 million ($330 million) Net Zero Hydrogen Fund, due to be launched in early 2022.
The UK would study the network and storage infrastructure required for the hydrogen sector, as well as assessing the feasibility, safety and cost effectiveness of blending up to 20% hydrogen into the existing natural gas supply, BEIS said. This could cut CO2 emissions by 7%, it said.
The strategy also envisages a role for hydrogen in decarbonizing heavy transport, marine fuels and aviation.
The UK is focusing on incentivizing private investment in the hydrogen sector, hoping to attract GBP4 billion by 2030, but has allocated some funds for developing and scaling new technologies.
In addition to the Net Zero Hydrogen Fund, the government has earmarked GBP315 million in an Industrial Energy Transformation Fund to help industry move to low-carbon fuels, including hydrogen.
A GBP60 million low-carbon hydrogen supply competition will fund innovation in production, transport and storage, while GBP183 million will go towards transport decarbonization, including trials and roll out of hydrogen technology.
A further GBP40 million is allocated to a red diesel replacement competition grant to develop and demonstrate low-carbon alternatives to the fuel in the construction, quarrying and mining sectors.
The timeline in the strategy identifies policy measures needed over the next decade and beyond, though these are yet to be developed.
It sees early adoption of hydrogen in some buses, heavy goods vehicles, rail and aviation trials by 2024, with industrial applications developing in the mid-2020s, and wider use in industry and power from the late 2020s.
A full adoption in steel and power systems could take place from the mid-2030s, it said, along with a potential conversion of the gas grid.
"This strategy signals the UK's commitment to hydrogen and provides the certainty needed to boost consumer and investor confidence and support commercial solutions," National Grid Hydrogen Director Antony Green said in the same statement Aug. 17.
Many in the nascent low-carbon and renewable hydrogen industry were calling on the UK to up its production capacity target.
"While we welcome positive steps like the new Net Zero Hydrogen Fund, overall the strategy doesn't focus nearly enough on developing the UK's world-leading green hydrogen industry," RenewableUK CEO Dan McGrail said in the statement Aug. 17.
"In the year when the UK is hosting the biggest climate change summit for years, we fear that international investors in renewable hydrogen may compare this strategy to those of other countries and vote with their feet," McGrail said.
Many other European countries have an exclusive focus on, and specific targets for, renewable hydrogen production.
A report from researchers at Cornell and Stanford universities published Aug. 12 has also called into question the sustainable credentials of blue hydrogen, finding it could have 20% higher life cycle greenhouse gas emissions than natural gas in heating.
The UK hydrogen strategy forms a key part of the government's plans to reach net-zero CO2 emissions by 2050, building on its 10-point plan for a "green industrial revolution."
BEIS said in most of the pathways modeled for the UK's Sixth Carbon Budget, hydrogen demand doubles between 2030 and 2035, continuing to rise rapidly in the 2030s and 2040s to reach around 250-460 TWh by 2050, accounting for up to a third of final energy demand.
The government will launch a hydrogen sector development action plan in early 2022, it said.
S&P Global Platts assessed the cost of producing hydrogen via alkaline electrolysis in the UK (including capex) at GBP6.41/kg ($8.87/kg) Aug. 16. PEM electrolysis production was assessed at GBP7.79/kg, while blue hydrogen production by autothermal reforming was GBP2.74/kg (including capex, CCS and carbon).
Source:Platts
