The hydrogen supply chain in Scotland will struggle to meet anticipated demand in the nascent sector without additional action to support it, according to a report.
The report was produced by BP Aberdeen Hydrogen Energy Limited (BP AHEL), a joint venture between North Sea giant BP and Aberdeen City Council.
The partnership is progressing the £40 million Aberdeen Hydrogen Hub (AHH) project after taking a final investment decision in July following months of delay.
At the time, BP Aberdeen Hydrogen Energy Limited (AHEL) chief executive Oliver Taylor said the firm would support the development of local supply chains.
As part of this, the BP AHEL report examined the challenges facing the UK hydrogen sector and aims to identify gaps in supply chain capabilities.
It outlined several challenges facing hydrogen developers in Scotland, in areas ranging from skills and manufacturing to project visibility and supply chain bottlenecks.
The report comes as BP AHEL awards the first tranche of contracts to five local supply chain firms.
The firms picking up contracts include Hydrasun, AECOM, Robertson Civil Engineering, Turner & Townsend and FES Group.
Hydrogen supply chain
The BP AHEL report focuses on hydrogen production and does not address supply chain challenges in transport and storage.
According to the report, the current low level of installed renewable and low-carbon electricity capacity in the UK compared to Scottish and UK government targets presents challenges to developing supply chain capability.
The lack of local manufacturing experience in Scotland, particularly for electrolysers, presents a “particular challenge”.
Other supply chain bottlenecks identified in the report include long lead times for key components, the availability of electrical contractors, and securing engineering services.
© Supplied by WrightbusAdditionally, the report highlighted that the UK hydrogen sector faces competition from regions with attractive investment incentives such as the US, Europe and India.
“This competition highlights both the need to develop a local supply chain that can help meet domestic targets while retaining local economic benefit, and the opportunity for the local supply chain to export its products and services to global markets,” the report said.
BP AHEL also said addressing skills shortages and establishing industry standards and best practices will also be important in reducing investment risks within hydrogen.
Aberdeen Hydrogen Hub
Taylor said the report outlines recommendations and actions to achieve supply chain and related skills development.
“Aberdeen has pioneered in the energy industry for over six decades, and the supply chain has been at the heart of this; evolving and advancing to achieve the sector’s ambitions,” he said.
© Supplied by Kami Thomson/DC Thom“Now, as the city’s future energy aspirations are being realised through lower carbon projects such as the Aberdeen Hydrogen Hub, it’s vital the supply chain is positioned to seize the related growth opportunities.”
The report recommendations included expanding the scope of the North Sea Transition Authority (NSTA) ‘Energy Pathfinder’ tool to include onshore hydrogen and mandate is use for all developers and operators.
Improving supply chain visibility is needed to “encourage participation and to support investment decisions”, the report said.
Other recommendations focused on improving knowledge sharing and formulating industry standards, and ensuring local content in projects.
BP AHEL said buyers should consider applying the North Sea Transition Deal target of 50% local content from the beginning of new projects, and develop simplified procurement processes.
Local supply chain
Backing up the report, BP AHEL also announced a series of contracts with local North East supply chain firms alongside the release of the report.
Hydrasun will provide hydrogen equipment services, FES will handle electrical services, and Robertson Civil Engineering will design and construct physical infrastructure at the hub.
Meanwhile AECOM has been awarded a contract as principle designer and owner’s engineer, while Turner & Townsend will provide project services.
© Supplied by Shutterstock“We’re proud to be working with many Scotland-based suppliers and companies in the early stages of their own transition into this sector, to support jobs that will deliver this exciting project for Aberdeen and its people,” Taylor said.
Supply chain boost
Robertson Civil Engineering executive director Martin Kiely praised BP’s “commitment to inclusive growth that supports the supply chain, skills development and wider community”.
Hydrasun chief executive Neil Thompson said the AHH is a “significant project” for the region and a “key milestone” in the company’s energy transition journey.
“We’re excited to be involved in projects such as this, which we believe continue to build confidence in the key role of hydrogen, both in the energy transition and in the future energy mix,” Thompson said.
FES Group energy operations director James Reid said the BP and Aberdeen City Council project will play a role in “developing the hydrogen foundation for a resilient energy ecosystem that can power generations to come”.
AECOM director of energy for UK and Ireland Eloise John said the contract with AHEL will support the growth of a “new generation of green skilled workers”.
John said the project will help to transition local jobs and supply chains to ensure Aberdeen is “ready to take advantage of the global energy transition and the economic opportunities it will bring”.
A report commissioned by Aberdeen City Council in 2021 claimed there could be up to 700 skilled jobs across the hydrogen industry by the end of the decade if the AHH is scaled up to produce the fuel for export.
Green hydrogen electrolysers
But a key question remains over where the project will source its electrolysers from, as there are currently no electrolyser manufacturers in Scotland.
BP AHEL said given the Scottish government’s target to produce 5 GW of hydrogen by 2030 and longer term goals out to 2030, the potential benefits of developing domestic manufacturing capability “could be significant”.
“Creating local electrolyser manufacturing capability could help ensure a stable supply
of these critical assemblies and contribute to job creation and economic growth in Scotland,” the report said.
According to the International Energy Agency, Chinese manufacturers are leading the way in electrolyser production, followed by firms in the EU and the US.
© Supplied by Ironside FarrarThe largest UK electrolyser producer is Sheffield’s ITM Power, which last month secured a 500 MW capacity agreement after years of financial troubles.
With projects like the “world scale” Kintore Hydrogen project also progressing, there could be growing demand for local electrolyser production in Scotland.
In an effort to capitalise on this, Aberdeen not-for-profit Energy Transition Zone (ETZ) Ltd is aiming to attract electrolyser manufacturing to its proposed hydrogen campus.
BP AHEL said developing domestic supply “could limit reliance” on international suppliers, but would also require “significant commitment and investment”.
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