The scalability of UK green hydrogen is reliant on demand, infrastructure and financing according to law firm, Osborn Clarke, which has released a whitepaper.
Looking at each of these areas in isolation, scaling production alone will not be enough to grow green hydrogen, it said. As well as this, establishing foundation demand will be crucial for the green hydrogen market to thrive. This means government narrowing the cost gap between green hydrogen and incumbent fuels, calling on policies, strategic use cases and incentives that can see decarbonisation goals balanced with economic competitiveness. Industries that use hydrogen as feedstock are likely to be where initial, stable and scalable demand will come from, such as ammonia production and petrochemical refining.
There is also a need for government to de-risk demand, taking steps to support demand liquidity, with Osborne Clarke recommending it acts as a buyer of last resort and looks to expand the eligibility criteria in support mechanisms such as the Contracts for Difference scheme. In doing so, it would be providing the certainty to stabilise demand, reduce financial risk and then unlock key private-sector investment.
Turning to infrastructure, the UK has embraced a cluster-based approach to date and now has the challenge of connecting localised hubs and building a cohesive network. This integrated network will be critical to balancing supply and demand, avoiding bottlenecks and ensuring equitable access, with the paper pointing to Germany as an example to follow. Its National Hydrogen Strategy set a clear path forward, earmarking billions in funding to build a hydrogen backbone spanning 9,000km by 2032.
Over the short-term, hydrogen blending would see producers gaining access to a pseudo-national hydrogen network, providing a demand floor while reducing financial risks. Though the long-term success is reliant on having a purpose-built hydrogen pipeline network, decoupling hydrogen from natural gas, while supporting high-value applications.
The government must look to build confidence too to unlock investment, with Spain noted as a cautionary tale, faced with insufficient demand and market uncertainty hindering its progress. Prioritising foundational demand in hard-to-abate sectors, alongside the deployment of targeted interventions, has the potential to reduce risk. Germany was once more highlighted for its climate contracts – a type of CfD that allows industrial users to buy hydrogen affordably, while still ensuring producers remain financially viable.
Supply chain resilience is another crucial consideration, with coordinated efforts key between government and industry to stabilise the supply chain, aligning development priorities with growing demand, building a path for a sustainable evolution of the hydrogen sector.
Looking ahead, Osborne Clarke described the UK as being at a “pivotal moment” in its green hydrogen journey. It needs an integrated strategy balancing immediate needs with long-term goals, outlining how a demand-driven approach will create conditions for investment and scalability, with long-term planning for dedicated infrastructure essential and a need to align this with supply chain resilience and financing incentives. Through this, the UK can place green hydrogen as a “cornerstone” of its decarbonisation strategy, transforming it from a transitional tool into a driver of industrial growth and climate resilience.
