Utility Week

UTILITY WEEK | MAY 2022 | 15 Gas electri cation, the only model for heat decar- bonisation that will reduce the UK's expo- sure to high gas prices." Euan Graham, a senior researcher at E3G, says the government's decision to retain a twin-track approach to hydrogen production makes "zero economic sense" and amounts to a "complete folly". "From our perspective, it also demon- strates the signi cant lobbying in- uence that's at play here," he adds. Shortly a‚ er releasing its Energy Secu- rity Strategy, the government also issued its response to a consultation on its pro- posed support mechanism for hydrogen production. This would take the form of a Contract for Di† erence (CfD), where producers would be paid the di† erence between a "strike price", re- ecting the cost of producing hydrogen, and a "reference price", re- ecting the mar- ket value of hydrogen. The cost of the top-up payments would be recovered through a levy on energy bills. Graham says subsidising blue hydrogen on the backs of customers would be "com- pletely unacceptable, especially since the economics of it are so bad now". 'We can't just turn o the tap' But Chris Manson-Whitton, director of Pro- gressive Energy, which is leading the HyNet industrial cluster in the North West, says forgoing the use of blue hydrogen is simply not practical given the huge scale of the chal- lenge the country faces. He points out that the country remains heavily dependent on fossil fuels like natural gas: "We can't just turn that o† because if we did, we'd risk the safety and security of peo- ple, we'd risk our industry, we couldn't carry goods around the country, and at the end of the day we'd just freeze our economy." "The question is, how can we square that with maintaining our climate commitments?" He says the UK will need to keep using natural gas in some form for some time to come, either by applying carbon capture and storage directly or producing blue hydrogen. In the case of the latter, "you're not then just trying to capture CO2 from loads of places. You centralise it, you do it as eš ciently as possible, but also you set up a new set of energy infrastructure … There are no emis- sions at the point of use. It gives us a parallel energy system along alongside electricity". "I do recognise that longer term using renewable electricity to generate our own green hydrogen is clearly going to be important," Manson-Whitton adds. But, he stresses: "We don't have enough renewable electricity to satisfy our electricity demand at the moment, let alone more." He says green hydrogen producers will have to compete with other consumers for this electricity, raising costs. "If we can build the infrastructure and we can develop hydrogen now that gets us going, we can capture 97% of the CO2 from the process, so in terms of the climate impact it is making a massive step change," he remarks. Manson-Whitton also believes there is a place for blue hydrogen in domestic heat- ing, particularly for homes in regions with industrial clusters like HyNet: "We are going to see a mixture of heat pumps and hydrogen in our energy mix. It will not be one or the other. It will be a mixture of the two. "If I've got a new-build property, abso- lutely putting in a heat pump make sense. If I haven't, and you have to recognise that 80% of the properties that will exist in 2050 have already been built today, not all of them will be suitable for heat pumps." Importantly, he does not believe that the current high gas prices will persist over the long term and will have dropped back down by the time blue hydrogen plants begin oper- ating from 2025 onwards. Clare Jackson, chief executive of the newly formed trade association Hydrogen UK, takes a similar line: "While it is impor- tant to reduce our reliance on natural gas, we can't turn the taps o† overnight. The key will be using our gas resource as cleanly and eš ciently as possible, and that's where the blue hydrogen piece comes in of enabling us to continue to use natural gas … in a way that is clean. "Blue hydrogen projects aren't going to come online until 2025, which means they won't be directly impacted by current price spikes. This will give chance for the global situation to settle." When asked whether the current high prices could nevertheless slow the devel- opment of low-carbon industrial clusters like HyNet, Jackson responds: "It is hugely important that it doesn't because it's not just about scaling hydrogen production projects. It's also impacting the end users they are servicing. "If you look at these projects, they are primarily demand led. Industry is crying out for hydrogen. You just can't decarbon- ise industry without hydrogen and so if we don't invest now, then we risk o† shoring the industrial heart of this country." She does believe the current high gas prices will provide further impetus to those looking to develop green hydrogen produc- tion: "We need to deploy more o† shore wind, more renewables. That's only possi- ble if you have a proper storage mechanism like hydrogen. The counterfactual that you're o‚ en looking to displace is natural gas, so a higher natural gas price certainly helps." One company focused on this is ITM Power, which designs and manufactures pro- ton exchange membrane electrolysers, and last year began production at its rst "Giga- factory" at Bessemer Park in Sheš eld. The rm was mentioned by name in the govern- ment's Energy Security Strategy. Chief executive Graham Cooley welcomes the increased hydrogen target but says "if I was the UK government, analysing the energy industry today, I would have made it 10GW of electrolysis only". He says high gas prices mean green hydro- gen is now already cheaper to produce than blue hydrogen and, if you include the carbon price, is even comparable to grey hydrogen (produced by reforming natural gas without carbon capture) and natural gas¦itself. Exactly how much cheaper is unclear because the costs of blue hydrogen remain uncertain: "It certainly adds 50% of the cost of moving from grey hydrogen to blue hydrogen." Furthermore, he adds: "You can't incre- mentally build up blue hydrogen. You have a to do a huge infrastructure project that in my view will mean that you'll spend a lot of money on something that is a stranded asset." Cooley believes green hydrogen will ulti- mately improve the UK's energy security by ending its reliance on imports: "I am confused with putting out an energy strat- egy that's supposed to help us get us o† of importing gas and then including blue hydrogen, which is made by imported gas." He says this will also have the added eco- nomic bene t of improving the country's balance of payments. Ultimately, he believes policymakers will come to the same conclusion: "I believe they will continuously up the green hydrogen target – the electrolysis target – and they will reduce the blue hydrogen target as they understand the e† ectiveness of the technol- ogy, the capital costs required, the length of time, as they analyse more and more, their own policy and energy security." Tom Grimwood, news editor "The government should move on from the distraction that is hydrogen for heating and press ahead with electrifi cation." COLM BRITCHFIELD, E3G

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