How hydrogen energy will drive the Prime Minister’s new growth plan
With the war in Ukraine still raging and the new Prime Minister’s ‘growth plan’ the main focus of Government, the aim for the UK to be a world-leader in hydrogen has taken on a new impetus. Hydrogen not only presents an opportunity for helping provide electricity, heating and fuels that are lower carbon and more secure, it also offers a major source of new growth. So, what is needed for the UK to seize this opportunity?
Precarious global gas supplies are forcing policymakers to look harder for a more secure and diverse energy future for the UK. Hydrogen has recently come to the fore as a principal plank of the low-carbon energy mix ministers want to encourage, and there are two principal production routes.
The first is ‘blue hydrogen’, produced mainly from natural gas, generating hydrogen and leaving carbon dioxide (CO2) as a by-product, which is then captured. The other route is ‘green hydrogen’, produced by separating hydrogen from oxygen in water using renewables-fed electrolysis, capturing the hydrogen and releasing the oxygen harmlessly into the air.
As the world’s largest hydrogen supplier, Air Products sees the UK as a major new market for hydrogen produced by both routes. We are planning to bring a brand new blue hydrogen facility to the Humber, which will create hundreds of new jobs in a top priority area for one of the Government’s new ‘Investment Zones’ and which will attract FDI and create growth. It will provide hydrogen primarily for industrial use across the UK, lowering the carbon footprint of electricity production.
There is a bright future for blue hydrogen in the UK and we would urge ministers to accelerate their plans to develop a hydrogen business model and funding schemes that encourage more to emerge.
We also believe ‘green hydrogen’ could be big in the UK, including as a service export specialism that would bring a great deal of value to the country. Green hydrogen produced in the UK at scale represents a new opportunity to participate in a rapidly expanding global market.
Recognising this, the Government wants at least 5 gigawatts of electrolysis-sourced hydrogen production capacity to be in place by 2030. However, there is as yet no significant UK supply of ‘green hydrogen’, no infrastructure to store and distribute it, and importantly, no functioning market to sell into. Unless this changes incredibly quickly, the private sector investment needed to meet this target cannot realistically materialise.
This is where we see three key pillars of new policy as absolutely critical in order to unlock the growth potential of this valuable technology.
The first is to import a significant supply of raw material, such as renewable ammonia, that can be used to produce ‘green hydrogen’ immediately, in order that a market can be built rapidly around it. This would not crowd out domestic production by electrolysis but would certainly be enough to kick-start the market. In terms of the extent of local value added, this is still very much ‘home grown’ production and without these imports, an organic electrolysis-based market would realistically take many years to emerge.
The second pillar would be to support this new supply and help create a market by identifying key areas of demand, including to fuel replacements for old, highly polluting diesel transport such as HGVs and buses. A recent study by WPI Strategy, which promoted the use of imports to kick-start a green hydrogen economy in the UK, suggested that production of just 200MW would be enough to do this, creating billions in new growth and taking the equivalent of 12,500 highly polluting lorries off our roads.
The third pillar would be a supporting framework of smaller ad hoc measures to essentially oil the wheels of the first two pillars. These range from help to facilitate the building of infrastructure, such as rapid permissions for acquiring and converting land for hydrogen use, through to government acting as an ‘anchor customer’ by buying green hydrogen for public sector vehicles. The new Investment Zones could be a perfect launch pad for this.
Ultimately, both blue and green hydrogen will help the UK build a more diverse, secure energy mix. Billions of private sector investment will be needed and, while investors are ready, government needs to make the UK an attractive environment to invest into.
This will mean moving beyond setting targets to accelerating actual concrete policy. The UK can absolutely build a hydrogen market and the UK has the skills base to capitalise on the huge global opportunities hydrogen offers. The right investors with the right expertise are ready. The big challenge is that ministers need to make it happen now – or risk losing the lead to other countries that can move faster.
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