Ahead of announcing its national hydrogen strategy, the UK government has been strongly urged by climate-change thinktank E3G to refocus its policy solely on green hydrogen production, rather than continuing its support for the blue variety and finding a use for legacy oil and gas assets.

Hydrogen Economist sat down, virtually, with the two authors of the Between hope and hype: a hydrogen vision for the UK report, launched this week—programme leader Lisa Fischer and policy advisor Juliet Phillips—for a discussion about its contentious contents.

The UK, a relative laggard among leading European nations in declaring a hydrogen strategy, is expected to announce its policy around the middle of 2021. It recently split a £117bn ($161bn) funding pool across nine carbon capture and storage (CCS) and hydrogen projects, with the vast majority supporting blue hydrogen.

“Honest analysis is needed to understand whether expensive investment in CCS and SMR needed for blue hydogren is justifed as a short-term investment” Fischer, E3G

However, E3G states in its report that blue hydrogen “should not be classed as low carbon” and risks locking-in high-carbon infrastructure and jobs. It instead recommends scaling up renewable energy and seeking competitive advantage in the nascent industry of green hydrogen produced from offshore wind.

The report recommends setting out a robust economics-led “vision identifying where green hydrogen production and use is likely to add most value… mainly applicable to high-temperature heat in industry, shipping and aviation, and long-duration storage in the power sector”.

E3G also attaches great importance to governance mechanisms that avoid locking in fossil fuel derived hydrogen with “clear timelines and targets” to “support a phase-out” of hydrocarbons.

It says the future hydrogen pipeline network should be based on future demand and supply rather than “how existing gas assets can best be kept functioning”.

It opposes the government’s mission to blend 20pc hydrogen into the natural gas grid as well as its ambition to create hydrogen towns and villages. “Nationwide blending of fossil gas and hydrogen is not appropriate,” it states.

For buildings, efficiency gains and technologies such as heat pumps should be favoured over the “small role” hydrogen is likely to play in heating around clusters. And, heading off the argument that blue hydrogen projects supports jobs in the declining North Sea industry, the government “must focus on supporting new green skills and jobs”.

“The government must promote evidence-based and society-wide decision making,” the report states.

The cost of green hydrogen is multiple times higher than grey and much higher than blue. Green would require huge subsidies for at least a decade. Is there not a role for blue hydrogen during this period in terms of establishing a market for hydrogen?

Fischer: Green is likely to become cost-competitive with blue in the 2030s. It would be a risky strategy to build up a mass-market for blue hydrogen—requiring expensive CCS infrastructure—for just 10-15 years. Instead, a focus on green hydrogen from the start will come with economic advantages and opportunities as the international innovation race moves ahead at pace—moving the UK away from fossil gas imports and towards a future powered by domestic renewables.

“Pursuing a twin-track approach carries a significant risk of lock-in to high-carbon technologies, infrastructure and jobs” Phillips, E3G

Phillips: The UK’s peers are making a big bet on green hydrogen, with Germany and others setting targets to ensure a proportion of future supply is met through renewable sources. The UK’s vast renewables potential—primarily through North Seas offshore winds—has a twofold advantage. Not only does it provide access to hydrogen production that is likely to become the cheapest option within the next decade, but it also means domestic access to a zero-emissions fuel, reducing reliance on international energy imports.

This will rely on a high deployment of offshore wind to meet electricity demand, with the UK developing an integrated and interconnected electricity grid in the North Seas to unlock the significant wind resources, zero-emissions energy sources and grid flexibility that will be needed.

The market for green hydrogen is almost certainly going to remain supply constrained for a long period. Given the volume of hydrogen from any source needed in the coming decades, should we not be pursuing an ‘all hands on deck’ approach? Would support for blue hydrogen production necessarily damage the buildout of green hydrogen supply?

Fischer: Developing blue hydrogen does not accelerate development of green hydrogen on the supply side, since these are fundamentally different technologies. It is necessary to access the most cost-effective pathways to decarbonisation, seeking those that offer the greatest social and economic co-benefits—delivering value to the public purse and targeting key regions and sectors.

Honest analysis is needed to understand whether expensive investment in CCS and steam methane reforming (SMR) needed for blue hydogren is justifed as a short-term investment, or whether this is better to deployed to build out renewables and bring down the cost of electrolysers

Unprecedented progress would be needed on CCS within the next decade if it is to play any meaningful role in the transition period. While carbon capture efficiencies are hoped to reach 85-95pc, current flagship CCS projects achieve far lower capture rates, below 35pc. There are also questions around practices in carbon capture usage and storage, with the oil industry using captured CO₂ gas injections as part of the enhanced oil recovery process. There need to be controls over how CO₂ will be used and where it will be stored, so that it will not be used to extract more oil.

Phillips: Blue hydrogen presents transition risks and regulatory challenges that the government must carefully consider. Pursuing a twin-track approach carries a significant risk of lock-in to high-carbon technologies, infrastructure and jobs. Governance mechanisms are needed to avoid a lock-in of fossil fuels and ensure a switch away from fossil gas and blue hydrogen, including clear timelines and targets, accountability and transparency mechanisms, and regulations and standards that support the phase-out—for example, through a rising carbon intensity limit.

“Public money should be focusing on the long-term solutions—building out renewables and electrolyser capacities” Fischer, E3G

A twin-track approach should not divert public funding resource away from the development of green hydrogen at the scale and speed needed to get on track to zero emissions, and the government can commit to ensure all public support for hydrogen development and deployment are focused on green.

Hydrogen will always be volume-constrained—that is not only on the supply side, but also the demand side. Where we use gas today, we would not necessarily use hydrogen tomorrow—for example, in residential heat and many industrial uses better alternatives are available—so we should stop thinking about the current system and how to evolve it and instead think about what an efficient system of tomorrow would look like.

Several gas grids are experimenting with blending in hydrogen, including Cadent in the UK and Snam in Italy. Although it does not provide the best decarbonisation benefits, it does provide certainty of demand that could allow commercial companies to invest. Is there any merit in this use of scarce hydrogen?

Fischer: Blending hydrogen is like diluting champagne with water. Industry end-users, such as steel and chemicals producers, would much prefer pure hydrogen. We would be driving costs up for them and harming their competitiveness if we use that valuable hydrogen elsewhere.

Phillips: The government‘s ten-point plan states that it will work with industry to complete testing necessary to allow up to 20pc blending of hydrogen into the gas distribution grid—with blending presumably needing to rise to 100pc hydrogen over time. It will be challenging to gradually increase the share given current infrastructure, and necessary to consider the transition risks if blending trials fail, or the quantities of green hydrogen that would be required never emerge. Some fear this could result in a technological dead-end similar to biodiesel dosing of diesel.

40pc – Gas use in industry for heat under 100°C and could be replaced with electrification

There will be further transition risks in the switch from 20pc to 100pc green hydrogen blending relating to jobs and infrastructure—potential stranded assets—as the supply and production changes. As such, nationwide blending of fossil gas and hydrogen is not appropriate.  

The government recently thinly spread £117mn across nine hydrogen and CCS projects. This is just about enough to get them to FID, not beyond. Is this a useful way of spending the money? Is it time to bite the bullet and spend real money on a small number of projects?

Fischer: The UK government is clearly falling behind its peers in terms of getting hydrogen off the ground. Its lack of focus is part of the reason—the development of CCS is important, but not so much for hydrogen production. Public money should be focusing on the long-term solutions—building out renewables and electrolyser capacities.

What should be the first use of green hydrogen— perhaps balancing the intermittency of renewables, or industrial applications?

Fischer: A systemwide stocktake can help establish where hydrogen adds the most value for jobs, productivity growth and climate—focused on sectors that do not have alternative decarbonisation options and regions that have access to abundant renewable energy sources. This is mainly applicable to high-temperature heat in industry, shipping and aviation, and long-duration storage in the power sector.

It is important to note, in many sectors, alternative solutions are already available—such as electrification of heat or transport—and often have the potential to further reduce operating costs for the end-user. Currently, 40pc of gas use in industry is for heat under 100°C and could be replaced with electrification—and even for higher temperature requirements, a range of power-to-heat options can be more energy-efficient than hydrogen.

Phillips: The most efficient way to produce and consume green hydrogen is in clusters focused on industrial consumers, developed ‘bottom up’. North Sea renewables modelling shows the most cost-effective way to produce hydrogen is on offshore hubs with green hydrogen piped ashore in repurposed gas infrastructure—where these geographically match.  The industries—and the jobs they support—in these clusters and hubs are heavy users of fossil fuels, with industrial clusters representing around 20pc of Europe’s greenhouse gas (GHG) emissions (excluding transport).

For certain high-carbon industries located in industrial clusters, green hydrogen may present a way to support jobs and a just transition in industries such as steel and chemicals. A good example is the steel industry. With 15pc of GHG emissions from British industry produced by the UK steel sector in 2018, decarbonising this sector—which employs 32,000 people directly in Wales and Yorkshire and the Humber, as well as over 40,000 more in wider supply chains—is key for reaching climate targets and making progress on the levelling-up agenda. Hydrogen-based steelmaking uses hydrogen instead of coal, both as an energy source and reducing agent, with pilots and demonstration projects underway.

What would a green hydrogen policy look like? How much would it cost and how long would it plausibly take to get green hydrogen to the point that it requires no further support?

Fischer: The backbone of a green hydrogen policy is to deploy renewables. The cost of electricity is the largest part of the costs of hydrogen production, and increased renewables can change that. Targetted policy instruments, for priority end uses can generate demand certainty alongside the designation of hydrogen clusters to keep distance between supply and demand and therefore infrastructure costs, as low as possible. A clear mapping of renewables resources against end-use priority sectors and existing infrastructures would be key.

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Author: Alastair O’Dell<BR>Senior Editor