The Hydrogen Energy Association (HEA) has called for carbon pricing, use of mandates, allowing risk taking intermediaries, blending and support for the development of inland hubs as ways to boost hydrogen demand.
Setting the scene, its report explained how hydrogen is fundamental to the success of the UK’s energy transition, with its production, use, storage and transportation offering a big opportunity to boost the energy system’s resilience, flexibility and security. While initial progress to develop hydrogen has been good, now is the time to scale up demand, with the HEA looking at how to do that and unlock as much as £11 billion of private investment.
With the UK’s carbon price as it is failing to stimulate zero carbon solutions, adjustment is needed from the just under £37 per metric ton it stands at today. Stakeholders across the hydrogen value chain need to be able to make long-term business decisions with confidence considering the scale of investment needed to adapt existing business models and infrastructure networks to hydrogen. Mandates, meanwhile, can also play a key role in stimulating the uptake of low carbon technologies and should be considered too.
In a bid to reduce risk for hydrogen producers and users, the HEA has also suggested allowing Risk Taking Intermediaries under Low Carbon Hydrogen Agreements. This would improve the financial security required by both producers and users to ensure a bankable project and could see a number of users and producers linked at various scales. As a result, this would improve the security of the whole supply chain and encourage the formation of joint ventures between different areas of it too.
Considering a substantial proportion of industrial activity takes place outside of the main industrial clusters, the HEA recommend investment in inland hydrogen hubs as well as the core industrial clusters and ports to allow for hydrogen trade. These hubs would see different user types and sizes combined, bringing together demand with local production, helping to mitigate reliance on long-distance transportation and national pipelines.
Finally, the HEA wants to see blending into the gas grid. Following the government announcing a strategic policy decision to support blending of up to 20% hydrogen by volume into the grid, it wants to see work on the safety case completed, enabling blending to become a realistic option. As well as acting as an offtaker of last resort to support hydrogen economy growth, blending can open up the opportunity for hard-to-decarbonise industries connected to the transmission grid to start using hydrogen and ensure that the UK’s network remains interoperable with Europe.
