Government launches plan for a world-leading hydrogen economy

Tens of thousands of jobs, billions of pounds in investment and new export opportunities could be unlocked through government plans to create a low carbon hydrogen sector in the UK over the next decade and beyond, according to the Business and Energy Secretary Kwasi Kwarteng. as he launched the government's first Hydrogen Strategy.

A booming, UK-wide hydrogen economy could be worth £900 million and create more than 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. Low-carbon hydrogen provides opportunities for UK companies and workers across our industrial heartlands.

With government analysis suggesting that 20-35 per cent of the UK’s energy consumption by 2050 could be hydrogen-based, this new energy source could be critical to meet our targets of net zero emissions by 2050 and cutting emissions by 78 per cent 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."

But some think that the government isn't allocating enough resources.

Nick Lyth, Green Angel Syndicate CEO, said: "There is a real chasm between the ambition expressed in this policy paper, and the resource allocation. It states a figure of £4 billion investment over the next 10 years, or £400 million annually on average.  In 2019 alone, UK Government spent £10.5 billion in support of fossil fuels, according to the EC Report, Energy Prices and Costs in Europe."

Alongside this, the strategy promises to consult on the design of a £240 million Net Zero Hydrogen Fund, which aims to support the commercial deployment of new low carbon hydrogen production plants across the UK; and also announces a £105 million funding package through its Net Zero Innovation Portfolio that will act as a first step to build up Britain’s low carbon hydrogen economy. The investment will help industries to develop low carbon alternatives for industrial fuels, including hydrogen, which will be key to meeting climate commitments.

Nick added: “These are very good intentions, but we know what is paved with good intentions, and it’s not real achievements.  These sums of money are disappointing.  £345 million sounds like a big number, but when set against the cost of commercialising technology innovation, it is a drop in the ocean.  Once again, the Government’s rhetoric is outstripping its delivery by hiding small numbers behind big words."

Head of Climate Strategy at Business West Nina Skubala said: “The much-awaited hydrogen strategy rightly identifies hydrogen as playing a key role in decarbonisation, whilst it can have many applications, it’s all about creating it without generating carbon and finding the right job for it to do.

“Its role in heating homes is limited, but for power, industry and parts of the transport sector it offers some fantastic opportunities to decarbonise.

“Here, in the West, we have a number of assets that help us grow a hydrogen economy: our motorway system, port, airport and industry. We also have the means to create pink hydrogen using nuclear and small modular reactors.”

The government’s approach is based on the UK’s previous success with offshore wind, where early government action coupled with strong private sector backing has earned the UK a world leading status. One of the main tools used by government to support the establishment of offshore wind in the UK was the Contracts for Difference (CfD) scheme, which incentivises investment in renewable energy by providing developers with direct protection from volatile wholesale prices and protects consumers from paying increased support costs when electricity prices are high.

As such, 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.

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 low carbon hydrogen production plants across the UK.

Other measures included in the UK’s first-ever Hydrogen Strategy include:

• outlining 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
• collaborating with industry 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
• undertaking a review to support the development of the necessary network and storage infrastructure to underpin a thriving hydrogen 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

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 to hydrogen 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.

Chief Executive at SSE Alistair Phillips-Davies said: "We strongly welcome the publication of this first-ever Hydrogen Strategy and hope to turn this encouraging strategy into firm and rapid action through our exciting plans. These include working with Equinor on the world’s first major hydrogen-fired power station at Keadby and developing hydrogen storage caverns at Aldbrough, as well as our partnership with Siemens to co-locate hydrogen production facilities at our wind farms. The strategy is a welcome first step to realising the potential of hydrogen.

Prioritising and supporting polluting industries to significantly slash their emissions, the government also announced today a £105 million funding package through its Net Zero Innovation Portfolio that will act as a first step to build up Britain’s low carbon hydrogen economy. The investment will help industries to develop low carbon alternatives for industrial fuels, including hydrogen, which will be key to meeting climate commitments. This includes:

£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

Hydrogen can be made as safe as natural gas. As the hydrogen economy develops, the government has said the all necessary assessments will be carried out and measures put in place to ensure that hydrogen is stored, distributed and used in a safe way.

The UK government is already working with the Health and Safety Executive and energy regulator Ofgem to support industry to conduct first-of-a-kind hydrogen heating trials. These trials along with the results of a wider research and development testing programme will inform a UK government 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.