UK makes reveals plans to become a ‘Hydrogen Economy’ – but what will actually change?

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. This is all part of the government’s aim of becoming a ‘Hydrogen Economy’ – but what does this mean? And how will it impact businesses across the UK? Business Leader investigates.

The UK’s first-ever Hydrogen Strategy drives forward the commitments laid out in the Prime Minister Boris Johnson’s 10 Point Plan for a ‘green industrial revolution’ 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 – which 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 an estimated £900m and create over 9,000 high-quality jobs by 2030, potentially rising to 100,000 jobs 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 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% 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% 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.”

Energy & Climate Change Minister Anne-Marie Trevelyan said: “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.”

What will a ‘Hydrogen Economy look like?

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 £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 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; and
  • 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.”

Prioritising and supporting polluting industries to significantly slash their emissions, the Government also announced today 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 UK 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 UK industry’s energy and resource consumption
  • This comes as the Transport Secretary unveils the winners of a £2.5m R&D competition for hydrogen transport pilots in the Tees Valley area, which will lead to supermarkets, emergency services and delivery companies using 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 & 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.

HYRDOGEN KEY IN DECARBONISING TRANSPORT, BUT WIDER IMPACT MUST BE CONSIDERED

Ben Foulser, director of future mobility at KPMG UK, spoke to Business Leader about the Government’s new hydrogen strategy.

Hydrogen has a key role in decarbonising transport alongside battery electric technologies in a dual-string approach. However, it’s applicability will largely be at the heavier end of the market and, dependent on advancements in battery technologies, it may be better suited to maritime, aviation, and specific parts of the rail network.

Battery technologies haven’t yet plateaued, and the UK must actively watch for inflexion points in the market to ensure investment delivers the best value for money. We must also consider the whole life impact of the respective technologies, and balance the adverse implications of battery replacement and scrappage against the costs and challenges in the use of hydrogen for transport.

Where hydrogen is used, there must be continued focus on securing truly zero emissions hydrogen that can be produced on a cost and energy-efficient basis. New research has highlighted the potential whole life emissions profile of Blue Hydrogen and the challenges that will be faced in achieving zero emission hydrogen production – pointing to a need to focus on Green Hydrogen.

Transient low emission fuels will also be needed to achieve truly zero emissions transport. Investment in first-of-a-kind sustainable aviation fuel plants in the UK through the Green Fuels, Green Skies competition is welcomed; however, a clearer strategy and plan for production, use, and the phase out of these transient fuels across all modes is needed in order to catalyse investment by industry.

Could a focus on hydrogen raise energy costs across the UK?

Following the launch of the Government’s Hydrogen Strategy, it’s anticipated that this push for hydrogen energy is likely to increase household bills. In light of this, Yad Jaura, Product Marketing Manager at Netcall, has called on utility providers to get ready to respond to consumers, using technology to support them through these forthcoming challenges.

News today that a push for hydrogen energy will increase household bills comes just weeks after regulators announced an increase price cap that will see energy bills for 15 million homes rise by at least 12% from October.

Following these announcements, energy providers and their contact centres must be ready to respond to an influx of inbound enquiries as consumers seek additional payment support – following the pandemic and its associated financial impacts.

In order to overcome these challenges, utilities providers must implement automated, digital platforms that not only make it easier for them to manage payment support processes internally, but also improve customer experience.

Low-code software solutions can be invaluable in this instance, as they enable utility providers to quickly build platforms accessible from a range of devices to access information, check bills, payment statuses, and set up payment plans. Due to its agile nature, low-code enables businesses to easily make changes to a process dependent on fluctuations in price caps.

£91M FUNDING FOR LOW CARBON AUTO TECH INCLUDING HYDROGEN ENGINES AND ULTRA-FAST CHARGING BATTERIES

Electric car batteries with range similar to internal combustion engines and can charge in as little as 12 minutes are among projects awarded over £91m of government and industry funding to develop the latest green automotive technology.

Four projects have been awarded funding through the Advanced Propulsion Centre (APC) Collaborative Research and Development competition, which supports the development of innovative low carbon automotive technology. Together they could save almost 32 million tonnes of carbon emissions, equivalent to the lifetime emissions of 1.3 million cars, and secure over 2,700 jobs across the country.

These innovations will address motorists’ concerns about adopting electric vehicles by cutting charge times and boosting driving range. They will help to make electric vehicles more affordable, efficient and convenient.

The projects awarded funding today are:

  • BMW-UK-BEV, Oxford – £26.2 million to develop an electric battery that will rival the driving range of internal combustion engines, helping put concerns over how far electric vehicles can travel to rest.
  • Project CELERITAS, Birmingham – £9.7 million to create ultra-fast charging batteries for electric and fuel cell hybrid vehicles that can charge in as little as 12 minutes.
  • The BRUNEL project, Darlington – £14.6 million to develop a novel zero emission, hydrogen-fuelled engine to help decarbonise heavy goods vehicles.
  • REEcorner, Nuneaton – £41.2 million to radically redesign light and medium-sized commercial electric vehicles in Nuneaton by moving the steering, breaking, suspension and powertrain into the wheel arch enabling increased autonomous capability, storage space and design flexibility.

The Government has already announced the end of the sale of new petrol and diesel cars in the UK by 2030, putting the UK on course to be the fastest major economy to decarbonise cars and vans, and is currently consulting on phasing out the sale of new diesel and petrol heavy goods vehicles (HGVs) by 2040, as set out in the Government’s Transport Decarbonisation Plan. The projects awarded funding today will help make the technological developments needed to meet these goals.

CEO at the Advanced Propulsion Centre Ian Constance said: “These projects tackle some really important challenges in the journey to net-zero road transport. They address range anxiety and cost, which can be a barrier to people making the switch to electric vehicles and they also provide potential solutions to the challenge of how we decarbonise public transport and the movement of goods.

“By investing in this innovation, we’re taking these technologies closer to the point where they are commercially viable, which will strengthen the UK’s automotive supply chain, safeguard or create jobs and reduce harmful greenhouse emissions.”

Industry reaction

Due to the wide impact of the switch to hydrogen in order to hit the UK’s Net Zero goals – Business Leader got some expert analysis from industry experts across the country.

Head of Climate Strategy at Business West Nina Skubala comments: “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.”

Graham Russell, Viessmann UK managing director, said: “As the UK looks to meet its 2050 Net Zero emissions target, we will need to change the way we heat our homes. A range of solutions will be required that fit the varying characteristics of buildings and the needs of consumers. A vital component in this transition to low carbon heat is hydrogen.

“Viessmann welcomes the UK Hydrogen Strategy published yesterday by the Department for Business Energy and Industrial Strategy (BEIS). This important document sets a clear direction of travel for the industry and enables companies such as Viessmann to continue investing in hydrogen solutions.

“Hydrogen boilers are a great option for consumers as they offer a like-for-like replacement with minimal disruption. Hydrogen also has wider benefits across the energy system, for example, when excess electricity is used to generate hydrogen by electrolysis, this encourages the further deployment of wind or solar power, contributing to a more resilient, low cost energy system.

“Viessmann is pleased to see the Government’s ongoing commitment to hydrogen trials and pilots which will demonstrate that hydrogen is as safe as natural gas and affordable for the consumer. We are also supportive of the Government’s announcement to consult on mandating “hydrogen ready” boilers from 2026 as this is a no-regrets step that will lower the cost of rolling out hydrogen heating in the future.

“Viessmann is one of the key pioneers in the hydrogen space with our hydrogen fuel cell that has been available since 2015. In addition, our Vitodens boiler range is certified and able to accept hydrogen blends of up to 20%, which means that consumers can begin reducing their emissions as soon as hydrogen becomes available. We are also working on our 100% hydrogen products for both domestic and commercial buildings and look forward to participating in trials and pilots over the coming years.”

Dale Edwards, a Green Energy Strategic Consultant with national law firm Clarke Willmott LLP, comments: “Following on from the Government’s 10-point plan for a Green Industrial Revolution, significant prominence has been placed in the role that hydrogen could play in driving the growth of low carbon economy. In the Energy White Paper, a stated objective of producing 5GW capacity by 2030 was announced, along with Government analysis suggesting that 20-35% of the UK’s energy consumption by 2050 could be hydrogen-based, raising expectations.

“With a vision to kick start a world-leading hydrogen economy, which has the potential to support over 9,000 UK jobs and unlock £4 billion investment by 2030, there is a significant commercial carrot, which could increase exponentially. From a pure environmental perspective, a low-carbon hydrogen economy could deliver emissions savings equivalent to the carbon captured by 700 million trees by 2032, an opportunity that cannot be ignored.

“Clarke Willmott welcomed the plan presented by the Government and funding to aid these objectives. In certain respects, the UK could be considered to be ahead of the curve in terms of the production of renewable hydrogen projects. To maintain competitive advantage globally, it will be interesting to see how the plan will develop in the future including the public consultation period on which a hydrogen business model will be adopted.

“The Green Energy Sector Group at Clarke Willmott have been actively discussing  and planning for the future low carbon economy. Keeping clients updated with developments both legal and sector-wide, along with writing articles and hosting and participating in events.

“Many Clarke Willmott clients have expressed interest in finding out more about how their business could benefit from the commercial and environmental development of hydrogen including commercial and passenger transport firms, engineering firms working in the green energy sector, developers considering district heating schemes and investors to name but a few.”

Steve McGregor, Group MD of property services specialist, DMA Group, said: “We should be proud that Britain was home to the first industrial revolution and is now paving the way for a next, green industrial revolution. We can’t underestimate the scale and breadth of the commitment to establish the UK as a global leader in carbon capture technology. It will protect tens of thousands of jobs whilst creating thousands of others. Collectively we must move towards renewable energy, waste less and reduce our demand.

“Commercial and residential contributions of all sizes will help create a greener, safer environment for generations and it is vital that we begin building ambitious, large-scale infrastructure with cutting-edge green technologies across the UK. Property designers, owners, occupiers and policy decision-makers must now determine the best way to improve building energy performance, from insulation and double glazing to heating, cooling, lighting and hot water alternatives. By unlocking targeted investment, grants and incentives the ambition of delivering better homes and buildings, cleaner air and a safer environment is in sight. But crucially of all, it provides genuine optimism for British innovation after what has been a turbulent 18 months.”