IS HYDROGEN ENERGY REALLY HERE AT LAST?
Over the past 20 years, the UK has become familiar with the increasing use of solar farms, wind turbines and electric vehicles in a bid to decarbonise energy-intensive industries and to move away from the use of traditional fossil fuels.
Nevertheless, greater investment and opportunities need to be considered to meet legally binding commitments to achieving net zero by 2050.
The establishment of a strong hydrogen economy is a very real opportunity within reaching distance. A hydrogen economy could provide a major opening for the UK’s energy, transport, and industrial sectors with substantial export potential. The British Energy Security Strategy doubled the UK government ambition from 5GW up to 10GW of low carbon hydrogen production capacity by 2030.
Within the renewable energy sector, green hydrogen offers an extremely attractive prospect. By converting the surplus energy produced during periods of peak generation, from solar farms during summer days and offshore wind farms overnight, into green hydrogen, a raw material can then be stored long-term and discharged for use when supply is low but demand is high. With reports of electricity ‘black-outs’ and concerns about the sustainability of the national energy network, the incorporation of commercial-scale green hydrogen plants presents an opportunity to compensate for the discontinuity between production and consumption.
Last month, British Gas and Centrica agreed a joint venture to trial the use of hydrogen in an existing ‘peaking plant’ aimed at examining the role that hydrogen can play in producing power. Peaking power stations are currently only run when there is a high, or peak, demand for electricity or when generation from renewables is low. The project is designed to test the practicalities of mixing hydrogen in with natural gas at a power plant, with the aim of reducing the overall carbon intensity of the site. The 2021 UK greenhouse gas emissions (provisional figures) published earlier this year, advised that in 2021 CO2 emissions in power stations rose by 9.2% due to an increased demand for electricity and the first increase in the use of fossil fuels for electricity generation from power stations since 2012.
One of the key opportunities for introducing hydrogen into the UK economy is through the use of low carbon hydrogen in fuel cell vehicles. Heavy duty applications such as HGVs, buses and ferries could play an important role in decarbonising transport. With its rapid refuelling time and higher efficiency density, improved fuel cell technology gives it a clear advantage over batteries. Hydrogen powered vehicles have a range similar to conventional diesel vehicles achieving 350-400 miles on a single tank of fuel and can be refuelled within 3-5 minutes. Transport for London has already introduced the use of hydrogen fuel cell busses along the 444 bus route and has set further targets that by 2037 at the latest, all 9,200 buses across London will be zero emission.
Despite the obvious benefits to the production and use of hydrogen, there are numerous challenges to overcome in the coming years to allow the hydrogen economy supply chain to grow to a significant enough level. The first of these is attracting demand. Without growing demand, the large-scale production of hydrogen will not happen. Devoid of a strong supply chain which acts to reduce the cost of hydrogen and provide confidence in the capability of the industry to deliver, consumers and public and private sector buyers will be reluctant to purchase hydrogen products.
The second and potentially most influential challenge is going to be the level of investment needed across the hydrogen economy to make it a success. The UK government recognises that 10GW of production capacity by 2030 will demand rapid scale-up of hydrogen investment. It is estimated that currently £9 billion of investment is required to reach targets for production by 2030, with equipment and technology already raising significant funding. Launched in summer 2022, the Net Zero Hydrogen Fund, worth up to £240 million, will fund the development and deployment of new low carbon hydrogen production to de-risk investment and reduce costs. This runs alongside the Hydrogen Business Model, another government led strategy, which supports further investment in hydrogen production with £100 million for electrolytic projects to cover the difference between the cost of production and the sale price. Despite the initial investment, there remains a significant amount of capital needed which relies on long term indication of demand and forecasts.
With these two key challenges currently unresolved, the UK hydrogen economy is met with the classic ‘chicken and egg’ dilemma. Without the proven, robust supply chain and demand from the public, investors are unlikely to inject substantial investment into the infrastructure needed to enable the UK to take a leading role in the hydrogen economy. Similarly, without the level of funding required to decarbonise the energy system and shift the public perception of ‘energy’ as just electricity, the industry is at a stalemate. This leaves us with the age-old question of what comes first, the chicken or the egg?
Please contact Rosalyn Gledhill, Energy Specialist in the CJ Energy team if you would like to discuss further.
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