UK government launches hydrogen strategy

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 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.”

Matthew Fell, chief policy director at the CBI said:

“With hydrogen key to unlocking decarbonisation across carbon-intensive sectors, as well as stimulating high levels of skilled green jobs, the government’s Hydrogen Strategy is a key milestone in the delivery of the UK’s 10 Point Plan. As a leader in high skilled manufacturing, and with an extensive legacy in energy production, the UK stands perfectly positioned to capitalise on the opportunities provided by hydrogen. As the countdown to COP26 continues, hydrogen is an area where the UK can lead by example on the global stage, showcasing the value of strong partnerships between government and the private sector on the road to reducing emissions.”

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

This comes as the Transport Secretary unveils the winners of a £2.5 million R&D competition for hydrogen transport pilots in the Tees Valley area, which will lead to supermarkets, emergency services and delivery companies trialling hydrogen-powered transport to move goods and carry out local services.

Hydrogen can be made as safe as natural gas. As the hydrogen economy develops, 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.

The Hydrogen Strategy is one of a series of strategies the UK government is publishing ahead of the UN Climate Summit COP26 taking place in Glasgow this November. The UK government has 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 this year.