By Rachel Garrett, Head of Offshore Hydrogen Development, RWE Renewables
As a company spanning a broad global portfolio of generation technologies and renewables, RWE welcomed last summer’s UK Hydrogen Strategy. An important first step, the strategy fired the starting pistol for a marathon of hard work that inevitably needs to follow.
Initially, we felt the strategy’s initial ambitions could be more challenging, and so have since been delighted by more recent Government commitments to doubling the target to 10GW, with at least 50% coming from electrolytic hydrogen. Also, the engagement from BEIS officials working on hydrogen has shown a genuine commitment to two-way dialogue, and listening and responding to industry.
That said, there’s always room for further opportunity; whilst the targets have changed the funding for incentivising developments hasn’t and there is a concern amongst the sector that the interim target of 1GW green hydrogen production by 2025 will be challenging. Equally, there are some concerns over Business Models, especially clarity of future funding and the inclusion of an Achieved Sales Price as part of the Reference Price.
And the big question still remains - what happens after 2025? We would like to see the Net Zero Hydrogen Fund continue after 2025, with bigger budgets and ambition. It is certainly positive to see proposals for Strand 1 and 2 funding from the Net Zero Hydrogen Fund, and that BEIS has confirmed the joint funding under Strand 3 which opens in the summer.
It is also good to see a Government commitment to Certificates of Origin by 2025, distinguishing greenhouse gas intensity. However, we would have preferred a clear differentiation between green and blue hydrogen in the Low Carbon Hydrogen Quality Standards.
Converting the UK to hydrogen is a ‘chicken and egg’ challenge and the ‘demand side’ needs careful consideration. Producers and offtakers need to grow the industry ‘hand-in-hand’ to be successful. Our experience is that potential users of hydrogen – especially industry – are not yet in a place where there is an urgent and pressing need to switch to hydrogen from high-carbon alternatives.
The UK Government has currently focused on the production side, and arguably more attention is needed on stimulating the demand-side to help create more of a market for the hydrogen produced.
Over the next few years we are likely to see green hydrogen production developments directly linked to or co-located with industrial demand, and powered by renewable energy supplied via the grid, perhaps with some mobility hydrogen production alongside.
Likely, we could see electrolysers co-located onsite with renewables if sufficient water is available and nearby hydrogen demand.
In addition, we expect to see small green hydrogen projects, focussed on transport uses (buses, heavy duty vehicles, train trials,) plus initial trials of hydrogen for commercial heat use.
To accelerate the deployment of green hydrogen projects and facilitate a UK hydrogen economy, the cost gap must be addressed, to ensure projects work financially. There needs to be sufficient funding to bridge the gap and give developers confidence that the necessary support is available, plus future funding models that allow projects to grow. Given the ambition has doubled, we must consideration if the existing support is sufficient.
Further, it is important to understand how much hydrogen production the Government wants to secure year on year beyond 2025. Only with a dynamic looking future will developers have the confidence to develop, plan and scale projects appropriately.
It is clear that over the coming years green hydrogen projects will grow to significant multi-megawatts scale, with industrial demand for green hydrogen driving larger developments, mainly focussed in hydrogen hubs or industrial clusters.
Our Pembroke green hydrogen project is an example of this.
Located in a heavily industrialised area, we are looking at an initial ~100MW electrolyser to supply industrial offtakers in South Wales, plus a bolt-on of ~10MW reserved for supplying hydrogen locally as transport fuel. We are already looking to expand by 200-300MWs in the mid to late 2020s, again focussing on industrial use in South Wales. The project could easily grow further to gigawatt-scale, directly linked to floating offshore wind in the Celtic Sea, but to date there is insufficient hydrogen demand locally to justify this. The speedier we expedite the current pipeline, we sooner we unlock the requisite demand. Therefore, we believe there is a need for a 100% hydrogen backbone that connects industrial clusters, creates storage capacity and allows hydrogen production and use to be connected via pipelines. When this happens projects will be better able to co-locate with renewables rather than being required to locate close to industry.
With larger gigawatt-scale offshore wind development sites now further offshore, and grid connections increasingly more challenging, standalone hydrogen opens the door for a different route to market. There are of course different challenges, like getting hydrogen to where it is required, but arguably hydrogen pipelines may be easier and cheaper to develop than new grid.
RWE is proposing to build commercial-scale floating wind projects off the Welsh coast, as part of The Crown Estate’s forthcoming Celtic Sea leasing round. As part of this we are looking at hydrogen alongside traditional electricity connections as a way to export energy. There is only limited electrical grid capacity available in South Wales; if there is real ambition to deliver large quantities of offshore renewables from the Celtic Sea, real consideration needs to be given to its conversion to green hydrogen and export throughout the wider UK via a 100% hydrogen backbone.
Hydrogen gives energy generated by offshore wind a route to market that may otherwise be impossible due to grid constraints and distance from shore. In other places, utilising existing offshore installations (O&G) could cost-effectively produce and transport hydrogen directly to shore for use elsewhere.
So, with the starting pistol still sounding in our ears, RWE stands poised and ready to drive a new green hydrogen future for the UK.