The UK government confirmed that hydrogen will play a central role in the decarbonisation of the UKCS in its North Sea Transition Deal this week. It has targeted combined investment with industry totalling up to £16bn ($22.1bn)—with £10bn to be focused on supporting hydrogen production.

The document set out the importance of the sector in plain terms: “Hydrogen is essential to meeting our net-zero commitment in the UK.” And it suggested important roles for both blue and green hydrogen, noting the country’s “world-leading offshore wind potential and electrolyser capability, alongside unparalleled carbon capture and storage sites”.

“There is a very serious discussion now going on around how we integrate hydrogen into the UK's energy mix” Watson, Pillsbury Winthrop Shaw Pittman

The UK set out its ambition to deliver 5GW of low-carbon hydrogen production capacity by 2030 in a ten-point plan last year. The Transition Deal estimates that capex of up to £4bn will be required to hit its target.

“I was glad to see hydrogen getting the prominence it did [in the deal],” says Gavin Watson, part of law firm Pillsbury Winthrop Shaw Pittman’s hydrogen practice. “There is a very serious discussion now going on around how we integrate hydrogen into the UK's energy mix.

“What I like about the UK's approach is that it is practical and pragmatic. It is rooted in the here and now, in what is achievable that is consistent with decarbonising, building a hydrogen economy, maintaining and creating jobs, and regenerating some key parts of the UK.”

Market mechanism

The document “focuses on creating the economic environment in which low-carbon hydrogen production can flourish”. It has committed to announcing details this year of its preferred business models and revenue mechanism to bring in private sector investment in carbon capture and hydrogen projects—and to finalise these in 2022.

The revenue mechanism is considered essential before any of the nine CCS and hydrogen projects that received a combined £117bn in phase two funding last week are to progress to FID.

“Policy support, which thankfully now is becoming much clearer, is something that lenders will certainly want to see,” says Watson, noting that the discussion has centred on contracts for difference as a possible solution. “But let us try to get to standalone, non-supported project as soon as possible.”

The deal also sets out a further range of undertakings: supporting hydrogen RD&D; structuring the market to allow hydrogen demand; accelerating the hydrogen project planning process; and continuing the iron mains replacement.

The UK has also committed to publishing a national hydrogen strategy in the first half of the year, following the EU and German plans, among others, announced last summer.

It is widely expected that blue hydrogen will be the focus of production for at least a decade, before green hydrogen costs fall to competitive levels. The UK is taking a balanced approach, in contrast to the greater favour attached to green on the continent.

Green hydrogen “is just not achievable” in the near term “because the infrastructure investment required to build out hydrogen production alongside the hydrogen infrastructure for a hydrogen-based economy will take several decades. The catalyst and enabler for the green hydrogen is blue,” says Watson.

“The UK's approach is enabling development of the hydrogen economy more quickly. Germany is certainly up there alongside us, and they have got a great engineering industrial tradition. Germany and the UK will lead the hydrogen race in in Europe and possibly, like the North Sea led the oil and gas industry and then the offshore renewables industry, I think Europe will lead the global hydrogen industry.”

Potential use cases

The deal also set out favoured initial use cases: “Hydrogen will be critical in reducing emissions from heavy industry, as well as in power, heat and transport.” Industrial emissions would be decarbonised through the clusters including Net Zero Teesside and Zero Carbon Humber.

£16bn – Total amount to be invested in decarbonisation by government and industry

The power component refers to blending hydrogen into the natural gas grid at a level that would not require major investment in infrastructure, envisioned at 20pc in 2023. Blending would be a relatively straightforward way of reducing UK emissions but has also been criticised for not bringing the greatest decarbonisation benefits from what will remain a scarce resource. The UK is also targeting a “hydrogen neighbourhood trial” by 2023, a “large hydrogen village trial” by 2025 and a “hydrogen town” by 2030.

“The gas grid is a good way to use [hydrogen],” says Watson but warns of potential “false economies” depending on specification. “There is a danger, by pumping hydrogen in people may think they are achieving more decarbonisation than they really are. Hydrogen would dilute natural gas, decreasing its efficiency, which means you probably need to use more of the gas mix.”

Andy Hemingway, president, energy optimisation and innovation, at energy services company Wood adds: “[The] announcement further underlines the UK’s commitment to hydrogen production as a key resource for domestic, transport and industrial sectors, and aids the transition of the oil and gas supply chain to support new energy resources. If carbon drove the industrial revolution, then hydrogen will underpin the low-carbon transformation we need as we build towards a net-zero future."

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Author: Alastair O’Dell<BR>Senior Editor