Scottish government targets 'hydrogen nation' status

Out-Law News | 27 Jan 2021 | 2:07 pm | 2 min. read

Scotland will need to substantially increase domestic production of low carbon hydrogen if it is to meet ambitious targets published last month, energy sector experts have said.

The Scottish government published its 'hydrogen policy statement' on 21 December 2020. The document, which is intended as a "clear signal of intent" for the industry and investors, sets an initial target of 5GW of renewable and low carbon domestic hydrogen production by 2030; enough to power the equivalent of 1.8 million homes.

Amy Stirling of Pinsent Masons, the law firm behind Out-Law, said: "The ambition is far-reaching, with the Scottish government aiming not only to establish sufficient hydrogen production to meet domestic market demand, but to position itself in the 2030s as an exporter of blue and green hydrogen to Northern Europe including to countries such as Germany and Belgium".

McGovern Gary

Gary McGovern

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Blue and green hydrogen production are proven technologies, and what industry and investors need are market incentives and a clear regulatory framework to stimulate the market.

Gary McGovern, also of Pinsent Masons, added: "The ambition set out in the policy statement is commendable. However, hydrogen production needs to ramp up exponentially to meet that ambition. Blue and green hydrogen production are proven technologies, and what industry and investors need are market incentives and a clear regulatory framework to stimulate the market".

'Grey' hydrogen is traditionally produced from methane using the steam-methane reforming (SMR) process, which produces carbon dioxide (CO2) as a byproduct. The process can be combined with carbon capture and storage (CCS), where it is known as 'blue' hydrogen. 'Green' hydrogen, which produces no CO2, uses renewable energy combined with electrolysis. However, it is currently considerably more expensive than blue hydrogen.

The Scottish government intends to allocate £100 million of its £180m emerging energy technologies fund to the hydrogen sector over the next five years. The policy statement sets out plans to harness Scotland's existing natural resources, skills and supply chain to develop low carbon hydrogen production at scale by the mid-2020s, linked to CCS; as well as the emergent role of hydrogen in the sustainable decarbonisation of critical industry functions and processes, transport and heat in buildings.

In the longer term, the statement targets larger scale production of renewable hydrogen from offshore wind. The "most ambitious" export scenario in the statement is based on a high renewable capacity delivered through the ScotWind seabed leasing round, which recently opened to applicants. An 'opportunity assessment', published alongside the statement, models the levelised cost of hydrogen production across three scenarios, finding the costs lowest for offshore hydrogen production coupled with a commercial scale offshore wind farm.

Stirling said: "ScotWind presents a real opportunity for the Scottish government to capitalise on Scotland's extensive renewable resources and to use that clean energy to move beyond decarbonising the electricity sector".

"In the future, we may see dedicated renewable supply for hydrogen production, which could go some way towards mitigating grid constraints, particularly in more remote parts of the country. There are, however, outstanding issues that need to be addressed to deliver offshore wind at the scale and pace required; particularly the approach to environmental and habitats assessments and coordinated transmission," she said.

Some of the barriers to clean hydrogen production at scale in Scotland will require action at the UK level, according to the policy statement. The Scottish government is calling for the UK government to address regulatory barriers, including amending the gas regulations to allow for greater blending of hydrogen; and to increase support for renewable electricity generation to meet future green hydrogen demand.

The UK government is expected to publish its own hydrogen policy statement later this year ahead of the COP26 conference in Glasgow in November. The UK government published its energy white paper in December 2020, which set a similar UK target of 5GW of low-carbon hydrogen production by 2030. It also committed to the creation of a Net Zero Hydrogen Fund of £240m of capital co-investment, to be provided out to 2024-25.

The Scottish government intends to publish an action plan later this year setting out how its hydrogen policies will be implemented, including how the £100m in funding will be allocated to research, innovation, development and demonstration of hydrogen production.