With talk of hydrogen-powered breakfasts as well as trains, ships and planes – have we reached a tipping point where this could become a reality?
While the 10 Point Plan shows a strengthening of the government’s commitment to hydrogen, investors need a detailed strategy, a roadmap and mechanisms to assess the financial viability of investment prospects.
Transitioning the UK to hydrogen power will be a huge challenge, but one that also offers significant opportunities for investment. However, the lack of clarity on future demand levels and hydrogen’s applications pose a high level of uncertainty for investors.
According to a comprehensive new report from Deloitte on Hydrogen, production technologies alone will need to attract between £3.5 billion and £11.4bn of investment by 2035. Further investments will be required in carbon capture, hydrogen conversion, storage and transport infrastructure.
So why the wide range of projected costs? While hydrogen plays a big role in all scenarios where the UK meets its net-zero target, projections show a significant variance in demand increase ranging between 179 terawatt hours (TWh) and 618 TWh by 2050. This enormous spread compares to the 27 TWh of hydrogen demand in the UK today, all from fossil fuels used as an industrial feedstock.
Hydrogen production is likely to be the largest cost component of most hydrogen projects followed by conversion, according to the bespoke model created for the report. The costs of different hydrogen production methods vary widely due to factors such as technology and fuel costs, carbon tax, load factors and the volume of deployment. In the scenarios designed to meet net zero, hydrogen production costs are projected to range between £1.5 per kg and £4.8 per kg in 2035. Blue hydrogen is likely to be cheaper than green to 2035.
End-user costs for hydrogen rise rapidly if it cannot be used in a gaseous state close to where it is produced, but needs to be converted into another medium, stored or transported. The Deloitte report shows that salt caverns and compressed gas tanks are the most cost-effective ways to store hydrogen. Transporting hydrogen is most cost effective as a gas in pipelines over long distances and large quantities.
In the transport sector, efforts will need to focus on reducing the costs associated with refuelling stations, which constitute another major component of the final levelised costs.
There are signs that what was once a fantasy of a hydrogen cooked breakfast is at least becoming a workable plan, albeit one with a range of steps to accomplish before it makes the kitchen table.
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