Industrial clusters and dispersed sites need certainty on hydrogen availability


While welcome commitments have been made in the industrial decarbonisation and hydrogen strategies, a more comprehensive, ambitious plan of action is “urgently needed” to cut industrial emissions at the pace and scale demand by net zero, a report has warned.

On 9 September, the Aldersgate Group published a report from Frontier Economics, centred around accelerating the decarbonisation of industrial clusters and dispersed sites. Industrial clusters and dispersed sites contributed an estimated 37.6MtCO2e and 33.6MtCO2e of emissions respectively in 2018 and, despite having differences in their net zero journeys and technological solutions, the industries located within each will require similar policy solutions to decarbonise.

Heavy industrial sectors, such as steel, chemicals, cement, glass and ceramics, are set to be fundamental building blocks for low carbon infrastructure, goods and services. Therefore, there is a unique opportunity to develop new competitive advantages and expand into new markets during the net zero transition. To scale up innovation, roll out supporting infrastructure and accelerate low carbon investment in industrial clusters and dispersed sites, it made a series of recommendations, including providing certainty to industry on the future availability of low carbon hydrogen, biomass and carbon capture usage and storage (CCUS) through using contracts for difference (CfD) and government matchmaking.

It explained how producers in both dispersed sites and industrial clusters need confidence hydrogen and carbon capture infrastructure will be available to them in order to invest in demonstrating and deploying these technologies. CfDs for key alternative fuels and CCUS would provide clear revenue streams for investors in these technologies and have proven successful in the past at supporting a significant increase in renewable electricity capacity and generation in the UK. The long-term certainty this would provide would support network deployment, with the report further noting policymakers should carefully consider the benchmark price and implementation of these CfDs to ensure they created the desired incentives. It also stressed the need to develop and establish standards for low carbon hydrogen in the UK as part of this process.

As for the UK government acting as a matchmaker between suppliers of alternative fuels, CCUS infrastructure and industrial producers in need of access these, it explained this would help to develop these markets and ensure there is sufficient capacity to meet demand. CfDs, however, was still cited as the preferable option over the government acting as an intermediary across multiple sectors. It further suggested that the government could complement such policies by directly legislating hydrogen production and CCUS targets to create a clear signal to the infrastructure which will be available by a given date, providing further certainty of supply.

Elsewhere, it also recommended close collaboration with Local Enterprise Partnerships, local authorities and devolved governments to design local infrastructure plans to help connect dispersed industries to the infrastructure being deployed in the clusters.