Hydrogen is a trending topic in any discussion of the energy transition. Blue hydrogen (from methane) is viewed as a potential transition fuel as we move to a low carbon economy. The OGA strategy which came into force in February requires licensees to ensure that technologies are deployed to enable hydrogen supply projects to be developed. But what would hydrogen be used for and is there a market for it?
In December, the Scottish Government published its Hydrogen Policy Statement and Scottish Hydrogen Assessment which envisages Scotland as a leading Hydrogen Nation. The key target sectors are industry, transport and heat. They have high energy demand and are both difficult to decarbonise and a priority for decarbonisation.
The statement points to the need for careful study of the most viable way to deploy hydrogen in each industrial sub-sector. A Scottish Net Zero Roadmap for industrial decarbonisation is being developed by NECCUS, a Scottish Government supported industry alliance. Carbon dioxide is a by-product of the production of blue hydrogen, so development of a CCUS network is a critical enabler for the so-called hydrogen economy. The most ambitious scenario in the assessment envisages hydrogen production with CCUS reaching 200MW by 2025 and 5GW by 2045.
Hydrogen has already been successfully demonstrated in a range of transport applications including Aberdeen’s own buses. Other projects are underway in Glasgow and Orkney. The focus is now on scaling-up as hydrogen for HGVs, buses, trains and shipping could kick start demand. The Scottish Government’s decarbonisation targets for transport (no new diesel or petrol cars or vans by 2030; decarbonising rail by 2035 and decarbonising scheduled flights within Scotland by 2040) will also drive a change to low carbon fuel.
The Scottish Government’s focus for the heat sector is to support targeted research and demonstrations, and, subject to further trials, to see small quantities of hydrogen blended into the gas networks in the early 2020s. Heat is the area where hydrogen will most closely touch the lives of the general public so there is also a commitment to raising awareness and understanding.
On hydrogen generation, the statement envisages a role for both renewables and oil and gas sectors, combining wind expertise and Scotland’s offshore engineering and services experience. Utilising offshore wind to create green hydrogen via electrolysis is seen as a medium to long term opportunity (building up alongside Scotland’s offshore wind fleet), so the near to medium term focus is on creating blue hydrogen from gas with CCUS utilising legacy oil and gas infrastructure. This will allow Scotland to ramp up production while investments are made in production of the electrolysers used to make green hydrogen. Currently, the costs are uneconomic but experience suggests these will fall.
The statement recognises the importance of locating hydrogen production hubs next to renewable generation, transport infrastructure, and legacy oil and gas assets. Grangemouth, responsible for 30% of Scottish industrial emissions, is earmarked as a potential hub of both supply and demand while the north-east will host another hub. Hydrogen also offers opportunities for rural and island communities both for production – due to proximity to large offshore wind farms – and for demand, through community energy systems incorporating hydrogen such as on Orkney (Surf ‘n’ Turf and now BIG HIT). Scotland’s geographical position also offers export opportunities: building on Scotland’s wind and wave power resources, its proximity to and its infrastructure connectivity with the EU, the aim is to produce the lowest cost hydrogen for international export.
The statement sets a challenging target of generating 5GW of renewable and low carbon hydrogen in Scotland by 2030. This will require significant cost reductions and enough domestic demand to build a baseload on which to grow expertise and generating capacity. Some £100 million of Scottish Government funding has been earmarked for hydrogen development over the next five years. Funding also comes from other initiatives including the £62 million Energy Transition Fund, currently supporting the Aberdeen Hydrogen Hub project. The Scottish National Investment Bank (SNIB) will also play a key role given the £2 billion it has to invest in Scotland over the next 10 years.
The Scottish Government alone cannot develop Scotland into a ‘leading Hydrogen Nation’: there is an expectation that industry and investors will play their part. Scotland’s enterprise agencies also have a role. Finally, as many of the levers required to build the regulatory framework are at UK level, the Scottish Government will need to work closely with Westminster to ensure that market mechanisms and carbon pricing arrangements for industry provide the appropriate price signals to encourage industry to switch to hydrogen; and that there is clarity on the regulatory framework for CCUS.
The next key document to look out for is the Scottish Government’s Hydrogen Action Plan which will be published later this year and will explain how these policies will be taken forward.
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