The UK's recently unveiled budget may be a disappointment for green hydrogen, but it presents a step forward for the deployment of the blue variety this decade.

The UK government has budgeted £20bn ($24bn) towards the deployment of CCUS, with support aimed initially at ‘track one’ clusters due to start coming online by the mid-2020s. No additional funding has been committed to the ‘hydrogen business model’ support scheme, despite industry concerns that the 250MW cap on the current funding round for electrolytic projects will leave credible projects unfunded.

However, the funding commitment for CCUS is a positive sign for the blue hydrogen projects shortlisted for connection to the track-one East Coast and Hynet clusters, which include BP’s 1GW H2Teesside; energy infrastructure company Kellas’ 1GW H2Northeast; Norwegian state-owned Equinor’s 600MW H2H Saltend; and the Hynet Hydrogen Production Project, developed by Vertex Hydrogen, a joint venture between refiner Essar Oil and clean energy developer Progressive Energy.

£20bn – Budget commitment to CCUS deployment

This budgetary boost for blue hydrogen comes amid a report on hydrogen’s potential role in the power sector by the Climate Change Committee—which advises the UK government on its net-zero strategy—that notes blue hydrogen will outcompete green up to 2035. The report anticipates “limited volumes of excess generation that can be electrolysed after more cost-effective means of balancing are taken into account” such as exporting via interconnectors or load shifting with demand-side response.

“If alternative methods of balancing negative residual demand become less accessible or competitive, the proportion of green hydrogen could increase,” the report notes, adding that green hydrogen is expected to be the dominant variety of the fuel by 2050 as more renewable and nuclear energy capacity comes online.

However, the report adds that, while blue hydrogen is “well-suited to meet the consistent hydrogen demand from the non-power sector”, the power sector will require greater flexibility.

“An effective approach to cost-effectively meeting the variable hydrogen demand [of the power sector] is to store low-cost green hydrogen produced during periods of surplus renewable energy,” it argues. However, this will depend on the development of salt caverns for hydrogen storage from 2030. The report estimates that a delay of ten years could constrain green hydrogen production from excess renewables due to storage costs, reduce predicted hydrogen power generation by 40pc and the size of the predicted hydrogen pipeline network by 36pc, and increase total system costs by £1.7bn in 2035.

The report calls for an acceleration of deployment throughout the hydrogen supply chain. It notes that 3–6GW of low-carbon dispatchable power generation capacity, 4–7GW of low-carbon hydrogen production, 1–2TWh of hydrogen storage and 39–64mn t of CO₂ storage must be under construction by 2025 to meet government targets.

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Author: Polly Martin