Hydrogen storage

UK Government launches plan for ‘world-leading’ hydrogen economy

Tens of thousands of jobs, billions of pounds in investment and new export opportunities will be unlocked through government plans to create a thriving low carbon hydrogen sector in the UK over the next decade and beyond, the Business and Energy Secretary has said.

The UK’s first ever Hydrogen Strategy drives forward the commitments laid out in the Prime Minister’s Ten
 Point Plan for a Green Industrial Revolution.

It does this by setting the foundation for how the UK Government will work with industry to meet its ambition for 5GW of low carbon hydrogen production capacity by 2030.

This could replace natural gas in powering around three million UK homes each year, as well as powering transport and businesses, particularly heavy industry.

A booming, UK-wide hydrogen economy could be worth £900m and create over 9,000 high-quality jobs by 2030, potentially rising to 100,000 and worth up to £13bn by 2050.

By 2030, hydrogen could play an important role in decarbonising polluting, energy-intensive industries like chemicals, oil refineries, power and heavy transport, such as 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 the country’s industrial heartlands, the government said.

With government analysis suggesting that 20-35% of the UK’s energy consumption by 2050 could be hydrogen based, this new energy source could be critical to meet the UK’s targets of net zero emissions by 2050 and cutting emissions by 78% by 2035, they said.

This is 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.

Commenting, Business and Energy Secretary, Kwasi Kwarteng said:

“Today marks the start of the UK’s hydrogen revolution.

“This homegrown 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.”

Energy and Climate Change Minister, Anne-Marie Trevelyan added:

“Today’s Hydrogen Strategy sends a strong signal globally that we are committed to building a thriving low carbon hydrogen economy that could deliver hundreds of thousands of high-quality green jobs, helps millions of homes transition to green energy, support our key industrial heartlands to move away from fossil fuels and bring in significant investment.

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.

This 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.

Built on a similar premise to the offshore wind CfDs, it 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 £240m 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 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.

Prioritising and supporting polluting industries to significantly slash their emissions, the government also announced a £105m 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:

  • £55m 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.
  • £40m 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 government’s budget announcement, removing the entitlement to use red diesel and rebated biodiesel.
  • £10m Industrial Energy Efficiency Accelerator (IEEA): Offering funding to clean technology developers to work with industrial sites to install, test and prove solutions for reducing the UK industry’s energy and resource consumption

Hydrogen can be made as safe as natural gas and as the hydrogen economy develops, all necessary assessments will be carried out and measures put in place to ensure that it 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 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.

The Hydrogen Strategy is one of a series of strategies that the government is publishing ahead of COP26 taking place in Glasgow this November.

They have already published its Industrial Decarbonisation Strategy, Transport Decarbonisation Strategy and North Sea Transition Deal, while its Heat and Buildings and Net Zero strategies will be published later this year.

PSE will be hosting a Public Sector Decarbonisation event on 9 September. Join us for the full day event by registering here.

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