UK could be global leader in hydrogen but risks losing out

Hydrogen will play a “vital role” in the UK’s future energy mix and presents a “significant economic opportunity”, but must move quickly to implement policy and regulation, a review into the UK’s Net Zero strategy has found.

Published today (January 30), the Mission Zero review by Chris Skidmore MP said the UK could be a global leader in hydrogen, however, faces real risk of losing out on the international stage if it does not “move quickly to implement its business models and regulatory frameworks.”

The review made three key recommendations for the UK Government to implement into its strategy to see it reap the benefits of the emerging hydrogen industry:

1. By the end of 2023, develop and implement an ambitious and pragmatic 10 year delivery roadmap for the scaling up of hydrogen production.
2. Deliver transport and storage business models as soon as feasibly possible and take a pragmatic approach to support key ‘no regrets’ transport and storage projects.
3. Continue the hydrogen heating community trials to inform decisions on the role hydrogen can play in heading. Additionally, it said by the end of 2023, the Government should update its analysis of the whole system costs of the mass roll out of hydrogen for heating, to ensure the scenario is economically feasible.

The report said that in a decarbonised energy system, there will be a need to replace high-carbon fuels in hard-to-abate industries, which could be met by low-carbon hydrogen, noting its suitability for steel production, shipping, aviation, and road transport.

Aside from its potential role in meeting Net Zero, the review also said, “The hydrogen transition presents a significant economic opportunity for the UK and could transform our North Sea energy industry and industrial heartlands.”

It found that investment in hydrogen to de-risk early projects is expected to unlock 12,000 jobs and over £9bn of private sector co-investment by 2030 in production alone. Adding that the European Union’s ambition to import 40GW of electrolysers by 2030 presented a “huge opportunity” for the UK.

With the Offshore Renewable Energy Catapult estimating that the production and overseas export of electrolysers would produce up to £320bn of GVA and 120,000 jobs by 2050, the review said that electrolytic hydrogen is becoming an ever more crucial part of achieving Net Zero in the case that high gas prices persist globally.

Despite the economic and decarbonising potential that hydrogen offers the UK, the review noted that low-carbon hydrogen production is yet to take off, with grey hydrogen remaining as the most common hydrogen production method, due to a combination of technology cost, policy/regulatory uncertainty, and delivery challenges.

Although noting moves by the UK Government to kick start low-carbon hydrogen production in the UK, the review said it must move further and faster, adding, “for hydrogen to play a role in our journey to Net Zero, we need to transition quickly towards blue and electrolytic hydrogen.”

The review highlights the US’ Inflation Reduction Act (IRA) which offers up to $3/kg in tax credits for low-carbon hydrogen production, as well as recent moves from Canada which look to plan similar incentives programmes.

“If we are to secure a position as a leader in the global market, predicted to be worth $2.5 trillion by 2050, we need to secure final investment decisions for notable projects in the early-mid 2020s,” the review reads.

The review comes less than a month after a report by the UK Hydrogen Policy Commission (HPC) warned that the UK Government’s hydrogen ambitions are lagging behind offer nations, and fails to offer a “clear, stable, and attractive policy and political environment.”

Released in December (2022), the HPC report said recent political instability, delays to the Energy Bill, and “worsening economic outlook” dealt a “hammer blow” to UK industry confidence.