28 June 2024
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Energy Ready: have you thought about hydrogen?

To The Point
(4 min read)

If your business operates in the real estate, infrastructure, agriculture or manufacturing sectors, or you want to reduce your haulage emissions, you should be getting ready for hydrogen. This Insight looks at the benefits of hydrogen, the funding available for its production and use, and some things to be aware of if you are planning to integrate hydrogen into your future energy strategy.

Hydrogen is rapidly gaining traction as both a clean energy and as a form of energy storage that can be used in contexts that vary from powering HGVs to heating homes. It can be transported and used in the same way as natural gas, but with added versatility given its ability to be used in fuel storage cells. The versatility of hydrogen is the reason why it has played a key role in Government policy and initiatives in relation to net zero and (while the outcome of the election may lead to a recalibration of some policies) is likely to remain so.


Diverse uses

One advantage of hydrogen is its diverse potential uses. As well as traditional uses in industry, such as in fertiliser and steel works (which will remain one of the key uses of hydrogen going forward), it could play a role in reducing domestic carbon emissions.

The H100 Fife project is trialling the use of hydrogen for domestic heating. If this proves successful, hydrogen could be provided to some homes fitted with hydrogen boilers. While we await the Government's final decision in 2026 on the exact role of hydrogen in heating, recent developments – in particular the curtailment of the hydrogen village trials and dropping plans for a hydrogen town – suggest that (in the short term at least) the focus in the domestic market may be on heat pumps and electrification. However, hydrogen boilers and supporting infrastructure will be vital in providing energy security by offering resilience to heat pumps (particularly in properties where their use is unsuitable) and hydrogen's diverse uses beyond home heating mean that hydrogen will remain a vital part of the Government's efforts to reach net zero.

Its versatility is shown in its potential to rival diesel as a fuel for both HGVs and trains, with larger vehicles (which cannot use battery technology as easily) particularly benefitting from the use of hydrogen as a fuel. Examples of such uses include the Tees Valley Hydrogen Transport Hub, which will include both hydrogen fuel cell vehicles and refuelling stations.

Hydrogen fuel cell technology allows for remote storage and delivery in a way that is comparable to fossil fuels, and without the delays that come with charging electric vehicles. Hydrogen fuel cells can also be used for flexibility – for example, excess renewable electricity can be used to produce hydrogen, which can then be stored and converted back to electricity, as required.

Last, but not least, hydrogen for power, with the Government looking to require new power plants either to be hydrogen firing or have carbon capture technology.

Multiple methods of production

Another benefit to hydrogen is that it has multiple methods of production, including utilising excess renewable electricity (something which may become particularly pertinent as other renewable generation efforts ramp up across the net zero programme). Hydrogen is a gas that, when burned, produces water as a by-product instead of carbon emissions. Though its production is currently more energy intensive than that of electricity, the ability to create "green hydrogen" via electrolysis, using renewable energy sources such as wind power, means that it is an effective way to avoid wasting renewable energy when domestic and commercial demand is saturated. Alternatively, "blue hydrogen" can be generated from natural gas via steam methane reforming plus carbon capture technology, a process that will facilitate the transition from gas to hydrogen without causing excessive shock to existing markets. The Government has facilitated CCUS enabled clusters through Tracks 1 and 2 of the cluster sequencing process (for example, with Hynet and the East Coast Cluster).

Hydrogen net zero investment roadmap

The UK Government hope to bring low-carbon hydrogen production up to 10GW by 2030, with up to 6GW of that coming from electrolytic hydrogen, and have (perhaps more speculatively) noted that hydrogen has the opportunity to provide up to 35% of the UK's energy consumption by 2050. In preparing to meet this target, they have produced an investment roadmap that covers opportunities across infrastructure - production, transmission, and storage - and industrial applications. Practically, these plans will be supported by the Hydrogen Allocation Rounds, the first of which awarded support to projects representing c125MW of production capacity and the second of which is currently ongoing and looks to award capacity of up to 875MW, indicative of the Government's continuing focus on hydrogen and its many uses (and the important role of electrolytic hydrogen within that).

Things to be aware of

Infrastructure: Blending of up to 20% hydrogen into the existing gas network has been approved. However, wider scale hydrogen production and transport will likely require significant changes to infrastructure, with recent Government plans supporting a hydrogen core network, with regional storage and transportation networks. Initial expansion will be supported by the hydrogen storage and transport business models, on which we expect to see more later in 2024.

Investment: To deliver on hydrogen's potential will require significant investment. Steps have been taken to support this, via (among other things) the Net Zero Hydrogen Fund, the hydrogen production, storage and transport business models and potential investment from the UK Infrastructure Bank (of up to £18 billion for hydrogen and related sectors).

Skills and supply chain: One of the challenges faced by the new hydrogen economy is a lack of hydrogen trained engineers and specialists, as well as delays in the supply chain (both as generally faced in the construction market and more specifically in e.g. electrolyser technology).

Consents: Finally, businesses should be aware of the installation and consent requirements. The usual planning consents would be needed for any construction works associated with hydrogen infrastructure.

How Addleshaw Goddard can help

Addleshaw Goddard are part of the vanguard working to make hydrogen's potential a reality. We are already supporting SGN on their groundbreaking H100 project, which is using green hydrogen produced with offshore wind power to supply several hundred homes in Fife. This represents the world's first hydrogen to homes heating network. We have also advised: (i) producers on the new hydrogen production business model and 'Low Carbon Hydrogen Agreement'; and (ii) on hydrogen storage.

If you are interested in how you can integrate hydrogen into your future energy strategy, we are able to provide expert guidance and support, including advising on: (i) the current and incoming regulatory structures (including licensing and legislative obligations); (ii) the various hydrogen business models, including the process for the allocation rounds and how the agreements with the counterparty work; and (iii) on a broad spectrum of commercial agreements to support the process – from construction contracts, to PPAs, offtake and commercial collaboration agreements.

As a full-service firm, we can advise on the planning, financing, and execution of hydrogen projects, drawing on our firsthand experience of working with this promising technology.

To sum up

If your business operates in the real estate, infrastructure, agriculture, or manufacturing sectors - or is simply interested in reducing emissions associated with haulage - hydrogen has huge potential as both a direct source of energy and form of storage of other renewable energies. Equally, for those interested in investing in the nascent hydrogen economy, Government support and incentives in relation to hydrogen, and the increased regulatory clarity, make this an exciting opportunity. Its versatility and potential use in domestic, industrial, and commercial settings means that it is likely to become a part of our everyday lives in decades to come. Though not as green as renewable electricity at this stage, as infrastructure integration improves, hydrogen has the potential to provide the missing link between renewable and traditional forms of energy.

If you are interested in the possibilities of hydrogen for your business, check out our Energy Ready tool and contact us for a chat.

To the Point 

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