On 29th June I joined a small industry panel arranged by BEIS for all of the Hydrogen and CCUS Directorate within BEIS.
Panel members were invited to speak for a few minutes on the following topic: Working with the hydrogen/ICC industry – tips for civil servants.
Based on feedback from members and from the REA Hydrogen Steering Group, I highlighted to BEIS civil servants the need for:
- A robust revenue stream to underpin investment decisions and highlighted the need for BEIS to make swift progress on the introduction of the hydrogen business model and keep on track with it
- Measures to ensure the market is as large as possible (if the market is too small the investor community will see it as higher risk leading to higher cost of capital). Here I also talked about the role of hydrogen blending to help de-risk projects and to encourage a greater uptake of hydrogen production, in line with our position statement on blending.
- Grandfathering of eligibility rules to ensure that production isn’t ruled ineligible after starting operation, for example additionality and emissions calculation rules
I strongly highlighted the need for cross communication and a joined-up thinking across different departments. I made three examples that would benefit from this greatly:
- Working with the DfT on the additionality rules – I pointed out that DfT has not published their rules on RFNBO, and this is holding back some projects so if BEIS want to meet their 10 GW target they need to work with the DfT on this (put pressure)
- The electricity market and policy on electrolytic hydrogen deployment need to go hand in hand – power market reforms will be critical to ensure the hydrogen sector can become cost competitive and, viceversa, the electrolytic hydrogen sector will be crucial to unlock more renewables. I mentioned the key role of the upcoming electricity market reforms and the need for this to be joined-up with policy on hydrogen supply and storage
- We are hearing mixed messages about biohydrogen from different government departments, with some parts recognising it is critical (as GGR for example) and others ignoring it(HBM)
Don’t pick winners at this stage of the market
It is important there is an early level playing field for all forms of low carbon hydrogen production pathways, and not only CCUS-enabled and electrolytic hydrogen – we shouldn’t preclude certain technologies to play a role in supporting the hydrogen economy (such as biomass/waste to hydrogen and TPE). It is important that BEIS is responsive and flexible in its approach over the next few years as this could make a major difference to how quickly projects on alternative production pathways are brought forward and successfully delivered. Business models need to be provided for those alternative pathways that are not electrolytic nor CCUS-enabled.
The industry welcome BEIS high quality and high level of engagement with industry to develop the hydrogen policy, however this engagement is very detailed, and the policy is regarded as quite complex. It is important that BEIS does not lose focus on what they are trying to achieve with the policy, which is to get the market going. If the policy is not perfect initially, it doesn’t matter, it can be refined later.
In the Q&A I also mentioned:
- The need for government to set out the principles and the direction of travel but let the market do the rest
- The need for clear signposting given all the policy being developed across different parts of Government – very difficult for developers to unpack it all and understand where they fit/how it applies to them
Other things that were mentioned in the main session or in the Q&A by other speakers:
- The need for demand-side measures to drive up demand
- The need to look and incentivise across the whole value chain not just supply
- The need to accelerate the T&S business models
- Where is the consultation on mandating H2 ready boilers? The boiler manufacturers have stopped innovation because they don’t have a clear signal from Government
- We need affordability envelope: Treasury need to give visibility on how much budget they are committing and over which period of time
- Need for a clear signal and investment in the gas infrastructure to connect supply with demand and storage
If you require any clarification, please don’t hesitate to contact [email protected].