Hydrogen is one of the ten points in the UK Government’s new plan for a “green industrial revolution” revealed on 18 November 2020.

In 2021, the Government’s hydrogen strategy will be published which will set out business models and the revenue mechanism for private sector investment. There will also be a consultation on the Government’s preferred business models for hydrogen in 2021 with the aim to finalise hydrogen business models in 2022.

While we await further detail in next year’s hydrogen strategy, the Government has outlined various ambitions and aims regarding hydrogen. This includes the aim for the production capacity of low carbon hydrogen to be 1GW by 2025 and 5GW by 2030. This will be supported by a Net Zero Hydrogen Fund of £240 million for new hydrogen production facilities. By 2030, the Government expects that there will be up to £4 billion of private investment expected in this area.

Hydrogen and heat

The intention is to shift towards lower carbon heating with no change in experience for domestic consumers through hydrogen blends. The Government states that this will still reduce emissions of gas used by up to 7%.

In 2023, there will be industry testing to allow for 20% blending of hydrogen into the gas distribution grid for all homes on the grid. In the same year, the first “Hydrogen Neighbourhood” will be trialled where all home heating and cooking will be by hydrogen. This will be followed by a trial of hydrogen heating in a large village in 2025 and a pilot “Hydrogen Town”, heated entirely by hydrogen, before the end of the decade.

At the end of November 2020, Ofgem announced their approval of a proposed network demonstration in Levenmouth, Fife which is intended to provide hydrogen to 300 homes over four years from the end of 2022. The hydrogen will be produced by an electrolysis plant powered by offshore wind. The energy regulator will award up to £18 million to the project.

Combination with other aspects of the ten point plan

There is a cross-over between hydrogen and other elements of the Government’s Ten Point Plan. Low carbon hydrogen production growth will be possible through the expansion and increase of carbon capture and storage (CCS) infrastructure to support blue hydrogen. Zero carbon hydrogen will be made possible in the UK through the growth of offshore wind and other renewables. For zero carbon hydrogen, the hydrogen is produced by electrolysis which separates water into hydrogen and oxygen using electricity from renewable sources.

Looking ahead

The Government is calling for hubs that include renewable energy, CCS and hydrogen which will create industrial “SuperPlaces”.

In addition to domestic heat, hydrogen can be used for industrial heat, power, shipping and trucking. Hydrogen is thought to be particularly important for heavy transport where long distances are covered and electric vehicles are much less suitable. Hydrogen is also being considered for the decarbonisation of industrial processes such as chemical refinery and steel production with hydrogen being substituted for natural gas.

Overall, the growth of low carbon hydrogen could deliver savings of 41MT CO2 between 2023 and 2032 which is equivalent to 9% of 2018 UK emissions, the Government states.

Steven Dalton
Steven Dalton
Partner, London
+44 20 7466 2537
Lewis McDonald
Lewis McDonald
Partner, Global Head of Energy, London
+44 20 7466 2257
Silke Goldberg
Silke Goldberg
Partner, London
+44 20 7466 2612