Authors Note: This article is covering an ongoing development. As such please expect it to be updated with links and other information as it comes to us.
The Government has released its long-awaited Hydrogen Strategy, which sets out the key steps needed in the 2020s to deliver a functioning hydrogen economy and meet its target of 5 GW of low-carbon hydrogen production capacity by 2030 set out in the Energy White Paper. It also sets the context for further scale up through Carbon Budget 6 to Net Zero by 2050.
The Government press release on the Strategy can be found here.
Government analysis, which underpins the Strategy, suggests that 20 – 35% of the UK’s energy consumption by 2050 could be hydrogen based, which could be critical to meet the UK targets of net zero emissions by 2050 and cutting emissions by 78% by 2035.
The document highlights the key role of low-carbon hydrogen in decarbonising polluting, energy-intensive industries (chemicals, oil refineries), power and heavy transport like shipping, HGVs and trains, as well as a limited role in replacing natural gas in UK homes.”
The strategy is split into the following five chapters:
- Making the case for hydrogen: role of hydrogen in achieving net zero in the UK, why hydrogen makes sense in the UK strategic framework.
- Scaling up the hydrogen economy: establishing a market and actions required across the value chain.
- Realising economic benefits for the UK: developing UK supply chain, jobs, skills and investment.
- Demonstrating international leadership and the UK’s role in international efforts.
- Implementation and monitoring: measuring impact, evaluation of progress and process for review.
Referring to a ‘twin track’ approach, the Strategy aims at supporting multiple technologies which include (but are not limited to) green and blue hydrogen.
We will upload to the website detailed members-only briefings on the Strategy in the coming hours and days.
Consultations and other documents released along with the Strategy
As expected, a number of documents and consultations have been released along with the Strategy:
- Consultation on the Government preferred hydrogen business models
- As previously highlighted to members, the Government proposes to introduce a Contract for Difference (CfD) type of approach, to overcome the cost gap between low carbon hydrogen and fossil fuels.
- Consultation on the design of the Net Zero Hydrogen Fund
- £240 million fund designed to support the commercial deployment of new low carbon hydrogen production
- Consultation on a UK standard for low carbon hydrogen so that only hydrogen that meets the standard will be eligible for support and associated report
- Analytical index (covering whole package)
- Hydrogen production cost report
In addition, the Government has launched a number of measures:
- £105 million new funding to support polluting industry to decarbonise [URL] – including a £55 million Industrial Fuel Switching Competition, a £40 million Red Diesel Replacement Competition and a £10 million Industrial Energy Efficiency Accelerator (IEEA)
- A consultation on hydrogen for heat: facilitating a grid conversion hydrogen heating trial
- A review to support the development of the necessary network and storage infrastructure
- A hydrogen sector development action plan in early 2022 setting out how Government will support companies to secure supply chain opportunities, skills and jobs in hydrogen.
We will provide detailed member briefings on the above documents in due course.
Member meeting on the Strategy and associated consultations
As previously highlighted, we are planning to arrange a member meeting to discuss the Hydrogen Strategy and related consultations. The meeting is likely to take place virtually in w/c 13 September but we are waiting confirmation from BEIS on their availability.
REA’s Initial Thoughts
We welcome the publication of the Strategy and, as we said in our quote on the official Government release, which we were pleased to be recognised as a key stakeholder in, this should provide certainty to investors and developers on the long-term commitment of the UK Government to support low-carbon hydrogen.
At first glance, the Strategy contains positive messages about the crucial role of low-carbon hydrogen to deliver net zero and where it can deliver real value, and appears to take a technology neutral approach supporting a range of pathways to produce low-carbon hydrogen.
We certainly see as positive the development of a robust standard that ensures only low-carbon hydrogen is supported and incentivised by Government and proposals to develop a supply-side subsidy scheme are also very welcome. In addition, the £240 million Net Zero Hydrogen Fund is a significant amount of money to support hydrogen production in the early 2020s.
Whilst we generally welcome the strategy, the devil is in the detail, which we will unpack over the next few days. Disappointingly, the ambition remains at 5 GW production capacity by 2030. We at the REA have said repeatedly this is not ambitious enough to deliver a world-leading hydrogen market.