The UK hydrogen economy – where are we now?

Government has set high expectations for the future of low-carbon hydrogen in the UK.

In November 2020 it published a 10-point net zero plan, which highlighted an ambition to produce 5GW of annual low-carbon hydrogen by 2030 from a starting capacity of close to zero.

The energy white paper, which it published in December 2020, made over 100 references to hydrogen across a range of applications for decarbonising heavy industry, domestic heat and transport.

The long-awaited UK Hydrogen Strategy landed in August 2021. This 121-page document confirmed that the government sees low-carbon hydrogen as key to delivering its net-zero plan, as well as stating its desire for the UK to be a global leader in hydrogen by 2030. The document sets out a full list of commitments across hydrogen production, networks and storage, end use in industry, power, heat and transport, as well as supply chains and skills.

In April 2022, in response to the global energy crisis and war in Ukraine, the government published a policy paper on British energy security strategy. At a stroke it doubled its ambition to 10GW of annual hydrogen production capacity by 2030.

And then in July 2022 the government release a Hydrogen strategy update to the market. This document reports against delivery of its commitments outlined in the August 2021 strategy.

So, does reality match the hype? Despite rumours of the Treasury doing its best to hobble spend on the energy transition (when many analysts agree that hydrogen infrastructure should be a low-regret investment), the government’s recent market update seems to confirm meaningful progress against its 2021 strategy. It has:

  • opened the first wave of the £240 million Net Zero Hydrogen Fund
  • awarded contracts for 23 feasibility studies under the £60 million Net Zero Innovation Portfolio, launched
  • awarded contracts in almost £390 million of investment in a wide range of programmes supporting fuel switching and innovation
  • similar awarded demonstrator funding for a raft of transport applications.

While some of these funded programmes are open to other fuels, hydrogen qualifies for all of them.

Despite stating that “the government is failing in much of its implementation” in its scathing June 2022 Report to Parliament, the Climate Change Committee (CCC), had this to say about hydrogen:

“The Government has made significant progress through the Hydrogen Strategy to deliver policies that can support the development of a hydrogen economy. Some uncertainties remain, in particular on the future mix of hydrogen production technologies and steps towards their deployment.”

Other signs of progress include success in securing government funding for Resonates’ clients’ hydrogen innovation programmes.

We need rapid progress in all areas identified in the Hydrogen Strategy to deliver it. However, with the election of a new Prime Minister currently underway and talk of scrapping green levies and rolling back renewables, there is uncertainty about the direction of travel for UK energy policy.

At a time when fossil fuel prices continue to spiral out of control and energy security is more important than ever, the economics of low-carbon hydrogen should make a compelling case for a ‘full-speed ahead’ strategy.

Of course, the government has a pivotal role to play in enabling the hydrogen economy, especially if it aspires to global leadership in this sector. But building a successful industry around the ‘home-grown super-fuel’ will take more than government policy and seed funding for demonstrator projects. Indeed, the government’s strategy aims to generate £4bn in private investment by 2030.

While there is still confusion around the hydrogen ‘shades of green/blue’ and exactly what constitutes ‘low-carbon’, the government’s twin-track strategy aims to overcome the ‘chicken and egg’ dilemma by ensuring that there is sufficient demand for the supply, and sufficient supply volumes to drive down cost.

For those involved in the hydrogen supply chain, the marketing challenge is shifting from one of awareness and education to differentiation and credibility; production cost and time-to-volume are becoming key issues today. Businesses operating in the hydrogen economy need clear and focused communication strategies to cut through market confusion, differentiate from their competition and hit the ground running.