The Hydrogen Stream: big push from UK, European Union


U.K. business and energy secretary, Kwasi Kwarteng, has set out long-awaited British hydrogen plans, arguing the move gives the U.K. a strategic advantage. “With the potential to provide a third of the U.K.’s energy in the future, our strategy positions the U.K. as first in the global race to ramp up hydrogen technology and seize the thousands of jobs and private investment that come with it,” said Kwarteng in a statement today. The government said it has based its approach on previous success with offshore wind, mentioning the contracts for difference (CfD) incentive scheme as central. “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.” The government is also consulting on a £240 million (€282 million) Net Zero Hydrogen Fund to support the commercial deployment of new “low carbon hydrogen production plants.”  The government also presented a £105 million (€123 million) funding package through a Net Zero Innovation Portfolio for industrial uses; £55 million for an Industrial Fuel Switching Competition, £40 million (€47 million) for a Red Diesel Replacement Competition, for the construction, quarrying and mining sectors; and £10 million for an Industrial Energy Efficiency Accelerator.

Blue hydrogen, powered by natural gas facilities equipped with carbon capture, utilization and storage (CCUS) technology is at the heart of the strategy. The British government said it wants to support multiple technologies by collaborating with the industry. “While we welcome positive steps like the new Net Zero Hydrogen Fund, overall, the strategy doesn’t focus nearly enough on developing the U.K.’s world-leading green hydrogen industry,” said Dan McGrail, CEO of clean energy industry body RenewableUK. The government published the plans ahead of the COP26 climate change meeting planned in Glasgow at the end of the year. According to government analysis, 20-35% of the U.K.’s energy consumption by 2050 could be hydrogen-based. The government added, it would be launching a “hydrogen sector development action plan” early next year.

Analysts have given a mixed response to the plans. “The government’s goal of 5 GW of low-carbon hydrogen production for 2030 may not position the country as a leader in the sector,” said Barbara Monterrubio, energy transition analyst at London-based GlobalData. The analyst has already tracked the equivalent of 4.6 GW in proposed hydrogen projects. In that sense, the plans seem reasonable but not hugely ambitious. Monterrubio said, for instance, “the Netherlands and Germany … already have 15 GW and 14 GW of respective projects in the pipeline.”

The U.K. government confirmed its ambition for 5 GW of low carbon hydrogen production capacity by 2030 but the strategy at present features only pilot projects and debate is continuing over the role hydrogen can play in residential heating. “The U.K. in particular has seen a lot of lobbying for hydrogen in the residential sector by gas incumbents but the national strategy released today sees a limited role,” tweeted Gniewomir Flis, from the German Agora Energiewende thinktank. Michael Liebreich, founder of BloombergNEF, said the plans are solid. “I think the U.K. hydrogen strategy is beautifully judged on heating,” he said. “Sixty-seven thousand homes by 2030 is enough to reveal the economics in all their glory; meanwhile, aspiring to reach 10% of domestic heating by 2035 is fine, even though it probably won't happen,” he tweeted.

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Thierry Breton, European commissioner for the internal market, has written a LinkedIn post supporting hydrogen as a driver of the EU’s “green revolution.” Breton said the EU must address strategic dependencies, which in the hydrogen case means “having access to critical raw materials and securing the availability of large amounts of decarbonized electricity.” The French businessman and politician underlined the potential role of nuclear in the sector. “In the short to medium-term, other forms of low-carbon hydrogen are needed, including based on nuclear energy,” he added. “Nuclear energy is available, steady and abundant. We could use this transitional energy to facilitate the deployment of a clean hydrogen industry in Europe.” Breton suggests disconnecting the reactors from the grid and using the energy for electrolyzers.

The European Union wants to unveil projects before COP26 with Breton writing: “The objective is to present a pipeline of investment projects during the upcoming Hydrogen Forum in November, based on the project proposals we collected this spring.” The commissioner said development banks and other institutions working with the EU would play a key role in financing projects, a development defined as “another challenge, notably for smaller companies.” Last month, the London-based European Bank for Reconstruction and Development teamed up with the Gas Transmission System Operator of Ukraine to promote the development and use of hydrogen. EU lender the European Investment Bank is also very active in the sector.

Breton said he supported the ongoing political and commercial process which will lead to the definition of important projects of common European interest, including country-led hydrogen projects showcasing nationally-available expertise and proposing plans for hydrogen clusters. Apart from financial support, the commissioner said the EU is working on other measures. “New, EU-wide certification systems and targets for the deployment of refueling stations for hydrogen are proposed,” he said. “The Energy Taxation Directive also sets preferential tax rates for the use of renewable and low-carbon hydrogen for end-consumers. Later this year, we will complement this package with a review of EU legislation on gas markets, which I believe … will reinforce the momentum for hydrogen deployment.”

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