Tens of thousands of jobs, billions of pounds in investment and new export opportunities will be unlocked through plans to create a thriving low carbon hydrogen sector in Wales and the UK over the next decade.
A booming, UK-wide hydrogen economy could be worth £900 million and create over 9,000 high-quality jobs by 2030, potentially rising to 100,000 jobs and worth up to £13 billion by 2050. By 2030, hydrogen could play an important role in decarbonising polluting, energy-intensive industries like chemicals, oil refineries, power and heavy transport like shipping, HGV lorries and trains, by helping these sectors move away from fossil fuels. Low-carbon hydrogen provides opportunities for UK companies and workers across our industrial heartlands.
With UK Government analysis suggesting that 20-35% of the UK’s energy consumption by 2050 could be hydrogen-based, this new energy source could be critical to meet our targets of net zero emissions by 2050 and cutting emissions by 78% by 2035 – a view shared by the UK’s independent Climate Change Committee. In the UK, a low-carbon hydrogen economy could deliver emissions savings equivalent to the carbon captured by 700 million trees by 2032 and is a key pillar of capitalising on cleaner energy sources as the UK moves away from fossil fuels.
Secretary of State for Wales Simon Hart said:
“With the announcement of the Hydrogen Strategy today, the UK Government is delivering on its commitment to tackling climate change and becoming a world leader in clean hydrogen energy.
“Wales, and the rest of the UK, will only thrive from the benefits that this strategy brings including the creation of thousands of new jobs, millions of pounds worth of investment in Holyhead and the excitement of being at the forefront of this green energy revolution.”
Business & Energy Secretary Kwasi Kwarteng said:
“Today marks the start of the UK’s hydrogen revolution. This home-grown clean energy source has the potential to transform the way we power our lives and will be essential to tackling climate change and reaching Net Zero.
“With the potential to provide a third of the UK’s energy in the future, our strategy positions the UK as first in the global race to ramp up hydrogen technology and seize the thousands of jobs and private investment that come with it.”
Energy & Climate Change Minister Anne-Marie Trevelyan said:
“Today’s Hydrogen Strategy sends a strong signal globally that we are committed to building a thriving low carbon hydrogen economy that could deliver hundreds of thousands of high-quality green jobs, helps millions of homes transition to green energy, support our key industrial heartlands to move away from fossil fuels and bring in significant investment.”
The UK Government’s approach is based on the UK’s previous success with offshore wind, where early government action coupled with strong private sector backing has earned the UK a world leading status.
One of the main tools used by government to support the establishment of offshore wind in the UK was the Contracts for Difference (CfD) scheme, which incentivises investment in renewable energy by providing developers with direct protection from volatile wholesale prices and protects consumers from paying increased support costs when electricity prices are high.
As such, the UK Government has today launched a public consultation on a preferred hydrogen business model which, built on a similar premise to the offshore wind CfDs, is designed to overcome the cost gap between low carbon hydrogen and fossil fuels, helping the costs of low-carbon alternatives to fall quickly, as hydrogen comes to play an increasing role in our lives.
Alongside this, the Government is consulting on the design of the £240 million Net Zero Hydrogen Fund, which aims to support the commercial deployment of new low carbon hydrogen production plants across the UK.
Other measures included in the UK’s first-ever Hydrogen Strategy include:
- Outlining a ‘twin track’ approach to supporting multiple technologies including ‘green’ electrolytic and ‘blue’ carbon capture-enabled hydrogen production, and committing to providing further detail in 2022 on the Government’s production strategy;
- Collaborating with industry to develop a UK standard for low carbon hydrogen giving certainty to producers and users that the hydrogen the UK produces is consistent with net zero while supporting the deployment of hydrogen across the country;
- Undertaking a review to support the development of the necessary network and storage infrastructure to underpin a thriving hydrogen sector;
- Working with industry to assess the safety, technical feasibility, and cost effectiveness of mixing 20% hydrogen into the existing gas supply. Doing so could deliver a 7% emissions reduction on natural gas; and
- Launching a hydrogen sector development action plan in early 2022 setting out how the Government will support companies to secure supply chain opportunities, skills and jobs in hydrogen
Prioritising and supporting polluting industries to significantly slash their emissions, the UK Government also announced today a £105 million funding package through its Net Zero Innovation Portfolio that will act as a first step to build up Britain’s low carbon hydrogen economy. The investment will help industries to develop low carbon alternatives for industrial fuels, including hydrogen, which will be key to meeting climate commitments. This includes:
- £55 million Industrial Fuel Switching Competition. Funding will support the development and trials of solutions to switch industry from high to low carbon fuels such as natural gas to clean hydrogen, helping industry reach net zero by 2050.
- £40 million Red Diesel Replacement Competition. Providing grant funding for the development and demonstration of low carbon alternatives to diesel for the construction, quarrying and mining sectors, with the aim of decarbonising these industries reliant on red diesel, a fuel used mainly for off-road purposes such as in bulldozers. With red diesel responsible for the production of nearly 14 million tonnes of carbon each year, the investment supports the UK Government’s budget announcement removing the entitlement to use red diesel and rebated biodiesel.
- £10 million Industrial Energy Efficiency Accelerator (IEEA). Offering funding to clean technology developers to work with industrial sites to install, test and prove solutions for reducing UK industry’s energy and resource consumption.
This comes as the Transport Secretary unveils the winners of a £2.5m R&D competition for hydrogen transport pilots in the Tees Valley area, which will lead to supermarkets, emergency services and delivery companies using hydrogen-powered transport to move goods and carry out local services.
Associate Director for the Carbon Trust Paul Huggins said:
“The previous rounds of the Industrial Energy Efficiency Accelerator have seen over £8 million of funding awarded to 16 successful projects. The programme has been instrumental in securing the first industrial demonstration of a wide range of innovative technologies, with the future potential to deliver up to 10 million tonnes of cumulative carbon savings over ten years.
“Seeing these technologies working at scale on site will reduce the barriers to widespread industry adoption of energy saving technologies. We are delighted that BEIS has re-appointed the Carbon Trust and our partners, Jacobs and KTN, to deliver the next round of the IEEA and look forward to supporting the next wave of demonstration projects and further contributing to UK’s industry transition toward net zero.”
Hydrogen can be made as safe as natural gas. As the hydrogen economy develops, all necessary assessments will be carried out and measures put in place to ensure that hydrogen is stored, distributed and used in a safe way.
The UK government is already working with the Health and Safety Executive and energy regulator Ofgem to support industry to conduct first-of-a-kind hydrogen heating trials. These trials along with the results of a wider research & development testing programme will inform a UK Government decision in 2026 on the role of hydrogen in decarbonising heat. If a positive case is established, by 2035 hydrogen could be playing a significant role in heating people’s homes and businesses, powering cars, cookers, boilers and more – helping to slash carbon emissions from the UK’s heating system and tackle climate change.
Ashley Rogers, Commercial Director – North Wales Business Council
“The challenge of delivering a Net Zero Carbon economy can only be achieved through deploying a range of zero and low carbon solutions and at pace. Hydrogen is an essential part of that mix, and the UK Government Hydrogen strategy is therefore to be welcomed, giving some certainty and reassurance to businesses across sectors across the UK. Amongst the key sectors for our region, we have world class businesses in both Manufacturing and Tourism and hydrogen has great potential to solidly support their journey to Net Zero on both energy and transport.
“Now that the strategy has been launched, it is critical given the latest IPCC report on Climate Change, that we work in partnership on its swift delivery across Governments, the Private Sector and other key stakeholders.”
The Hydrogen Strategy is one of a series of strategies the UK Government is publishing ahead of the UN Climate Summit COP26 taking place in Glasgow this November. The UK Government has already published its Industrial Decarbonisation Strategy, Transport Decarbonisation Strategy and North Sea Transition Deal, while its Heat and Buildings and Net Zero Strategies will be published this year.