A term you always read and hear in the media about getting to net zero is that there is no silver bullet. So-called ‘clean hydrogen’ is no different. It’s a necessary tool which must be deployed efficiently to play its role in cost-effective decarbonisation.
However, like other net zero technologies such as offshore wind power, clean hydrogen isn’t just a means to cut carbon, but an opportunity for the UK to thrive in tomorrow’s global economy.
Clean hydrogen is broadly produced by two methods: ‘Blue’ hydrogen is extracted from natural gas by mixing it with very hot steam in the presence of a catalyst and using carbon capture technology to remove the resulting CO2 emissions. ‘Green’ hydrogen is produced via electrolysis, passing a current through water to split it into hydrogen and oxygen, with the electricity provided by renewable energy. Inevitably, it’s impossible to capture all the carbon emissions when using fossil fuels, therefore blue is considered low-carbon while green is zero carbon.
Both blue and green hydrogen are new technologies that will scale up over the coming decade. Last week, the UK joined France, Germany, Japan and others in publishing a Hydrogen Strategy. The key theme is the Government’s ‘dual track’ policy – developing both blue and green hydrogen to reach its target of producing 5GW of low-carbon hydrogen capacity by 2030. This is expected to unlock a multi-billion pound industry which could create up to 100,000 jobs by 2050.
While the Government is building the frameworks to nurture the budding hydrogen economy, companies have been lining up to invest in production facilities. The Business Secretary launched the Hydrogen Strategy at the opening of ITM Power’s new hydrogen gigafactory (the world’s largest). BP recently announced plans for a project in Teesside which will deliver a fifth of the UK’s 5GW target by itself. Wrightbus is seeking to produce 3,000 zero emission buses by 2024 –10 per cent of the UK’s entire fleet.
This is why the global hydrogen economy is set to more than double in value in the next decade, reaching $420 billion in 2030. It will replace ‘dirty’ hydrogen in many existing sectors, such as fertiliser production, but will also be used as a fuel in a range of new sectors which must decarbonise: trains, aviation, shipping, heating, clean steel production and other industrial processes, for example.
Ministers are also clear that they envisage hydrogen production playing a starring role in the Government’s levelling up agenda. They’ll be guiding billions of pounds worth of private investment into the country’s industrial heartlands like Teesside, Sheffield, Humberside, Aberdeen, Liverpool, Anglesey and the South Wales industrial cluster, and more.
As with all new industries, however, the Government must make bets on which production method will be the most globally competitive in the future, and where clean hydrogen can be best deployed to help the country achieve its decarbonisation targets cost-effectively.
On the production side, blue hydrogen brings with it the scaling up of carbon capture and storage technology, another potentially very lucrative industry. However, due to the tumbling costs of renewable energy, green hydrogen is set to become more competitive than blue in around 2030. If we put too many eggs in the blue basket, we may end up having to rely on imports from our neighbours, and risk stranded blue hydrogen assets.
Then there’s how we use the hydrogen which, due to the required infrastructure investment, must be a government choice. Hydrogen has been touted as an alternative to electrification for replacing gas boilers in buildings, as hydrogen boilers would be less visibly disruptive than heat pumps. But hydrogen for heat would still require extensive upgrades to the gas grid and will always be more expensive than renewable electricity, risking higher household bills. It would be better to focus hydrogen deployment where it’s already used, or for the ‘hard-to-abate’ sectors like heavy transport, aviation and shipping, where batteries simply won’t cut it.
As with everything net zero, it’s vital to avoid unfairly hiking the cost of living. Following the publication of the Hydrogen Strategy, the Government is now deciding how to fund its new ‘Hydrogen Business Model’. This will be similar to the Contracts for Difference, the Government’s main mechanism for procuring renewable power which shields generators from market volatility by guaranteeing an energy price for the lifetime of the contract. The Hydrogen Business Model should be funded from general taxation rather than levies on household bills.
Clean hydrogen is a net zero necessity and an industrial opportunity. We can grow a flourishing UK hydrogen economy that creates secure, high-paid, fulfilling jobs across the country. As always with industrial strategy, though, the Government must work with industry to figure out how to invest efficiently and usefully.
