18th August 2021 | Commercial Energy

UK business and energy secretary Kwasi Kwarteng has set out plans to create a thriving low carbon hydrogen sector in the UK over the next decade and beyond. The UK’s first-ever Hydrogen Strategy aims to support more than 9,000 UK jobs and unlock £4 billion investment by 2030. The strategy document lays out its bid to attract investment in 5 gigawatts of hydrogen production by 2030. It suggests hydrogen could cover 20%-35% of the UK’s energy consumption by 2050, providing a clean alternative to oil and gas in energy-intensive industries.

It proposes a series of industry consultations to help establish a subsidy system. However, uncertainty remains over how the government will determine a fair subsidy for the multibillion-pound projects and whether the cost will be borne by households. The government has promised more clarity following an industry consultation later this year.

Mr Kwarteng said: “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.”

The government’s approach is based on its previous success with offshore wind, where the Contracts for Difference (CfD) scheme incentivised 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 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. Alongside this, the government is consulting on the design of the £240 million 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
  • 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.

More information available on the website below