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By Kee Evans, Aliki Zeri
27 Apr 2023 | 4 minute read
Recently, there has been considerable activity in the hydrogen space. The UK Hydrogen Champion, Jane Toogood, published her report on the state of play, making recommendations to the Government on spearheading the development of the hydrogen sector, the Government issued a consultation on the on the low-carbon hydrogen certification scheme and published an updated investor roadmap.
The end of March also saw the publication of the shortlist of projects that are likely to receive support as part of the first electrolytic allocation round.
In this article, we provide a snapshot of the key policy announcements and developments that interested parties need to be aware of.
The shortlisted projects total 408MW of capacity across England, Wales and Scotland and they include a number of green hydrogen plants. Applicants who were unsuccessful in this first allocation round are invited to consider re-applying to the second allocation round, although some industry players have suggested that the complicated nature of the application process could operate as a deterrent.
The Government has repeatedly emphasised that shortlisting does not guarantee that a contract will be awarded, and the Government's expectation is that contracts up to the value of 250MW are to be awarded as part of this round. The shortlisted projects are now going to enter the due-diligence phase, with negotiations commencing in Q3-Q4 2023 and successful projects being announced in Q4 2023.
The Energy Bill 2022-2023, which provides the legislative framework for the provision of financial support to shortlisted projects, is currently undergoing Parliamentary scrutiny. The Government has launched a consultation on the regulations that will need to be implemented to enable the shortlisted projects to progress and contract with the designated counterparty, which is anticipated to be the Low Carbon Contracts Company Ltd.
The consultation closes on 10 May 2023 and can be found here.
The Government has confirmed that the final form of the Low Carbon Hydrogen Agreement is expected to be published in Q3 2023, to enable negotiations to progress.
The UK Hydrogen Champion's report has been long-awaited; it was meant to be initially published in mid-December 2022. In her report, Mrs Toogood recognises the competitive advantage that other countries (such as the United States) have over the UK, where the cost of renewable energy in the case of green hydrogen is lower, or the government support offered is more generous. She focusses on specific actions that the UK government and industry could take to further promote the development of the hydrogen economy. With the aim of providing more certainty to investors, Mrs. Toogood recommends that the Government:
As noted above, currently contracts are expected to be awarded at some point in Q4 2023. Mrs Toogood also recommends that an estimate for the enactment of the Energy Bill is provided.
This would provide hydrogen producers with an alternative backstop option, were existing offtake arrangements to fall through. It encourages the Government to reach a strategic decision on the matter by 2023, with blending becoming available by 2025 at the latest, to enable further investment in hydrogen infrastructure.
This recommendation has not been always well received, not least due to safety concerns and the suitability of the distribution and transmission gas system for the purposes of hydrogen blending.
Currently, there is little detail on the factors that will be considered as part of any strategic decisions and any available funding. Again, there are discerning views within the industry and the scientific community on whether use of hydrogen as a heating solution delivers more tangible benefits than the electrification of buildings.
The report anticipates that “the use of hydrogen for rail is likely to be limited and shipping will not become a significant source of demand until after 2030, although it could swiftly overtake road transport at this juncture”.
In our conversations with industry participants, there appears to be an acknowledgement that there are potential synergies to be developed between floating offshore wind (FLOW) developers and green hydrogen producers, including in the context of using hydrogen as a means of powering the maintenance ships for the wind turbines.
This relates to the storage and transport network that will enable hydrogen projects to connect to demand elsewhere in the country. In the absence of such network, project developers are faced with difficulties, as they need to identify hydrogen offtakers that are located in close proximity to the production sites.
The recommendations are focused on ensuring that industry and Government work closely together to provide the use case and opportunity for hydrogen, and to provide the Government with much needed technical information and data. This will enable the latter to make decisions on some of the topics highlighted above.
In its updated Hydrogen Net Zero Investment Roadmap, the Government highlights that by "…by 2030 the sector (i.e. hydrogen) could support over 12,000 jobs and unlock up to £11 billion in private investment" and anticipates a steady increase in the deployment of low-carbon (green and blue) hydrogen projects between 2024 and 2030.
To deliver on the scale of the ambition, the Government estimates that:
In October 2022, we hosted our second green hydrogen roundtable and the consensus was that the UK risked being left behind, as other countries in Europe and further afield were creating a more investor-friendly environment.
That said, the results of the first electrolytic allocation round show that there is still appetite to invest in the UK, largely due to a combination of the following factors:
There has already been a flurry of events this year all aimed at bringing a variety of experts together to focus on finding a viable route to market for green hydrogen projects. Developers, scientists, and manufacturers alike continue to work on a wide range of technologies covering a range of applications and the growing momentum in this industry is tangible.
At a Marine Energy Wales conference held in Swansea in March, ERM Dolphyn presented its floating offshore wind farm with an integrated electrolyser on the platform and a hydrogen pipeline to shore. They reported that the small-scale trials this year had shown a good local demand for hydrogen.
At the Bristol Hydrogen Industry Leaders event in March, a representative from the Hyro joint venture explained how it is already working to ensure that gas is replaced with green hydrogen in two UK manufacturing sites. Both these projects demonstrate how green hydrogen has an important role to play in the energy transition.
We have booked our places at the next round of hydrogen conferences including the Green Hydrogen 2023 event organised by RenewableUK in May and the Hydrogen Gateway Conference organised by Western Gateway in June. We're looking forward to assisting with the progress of this technology and continuing to promote the implementation of clean energy schemes to support it
For more on green hydrogen, listen to our Thinking global podcast.
