UK Hydrogen Strategy: Unlocking the Potential of Low-Carbon Heating

May 10, 2023 | News

hydrogen ready

The UK government has set a clear direction for its net-zero emissions target by 2050, and hydrogen is emerging as a key energy source that can play a critical role in meeting this goal. With the prevalence of low-carbon heating technologies set to rise significantly over the next few years, hydrogen is expected to become a significant part of the conversation.

What is the UK Hydrogen Strategy, and what does it mean for businesses, investors, and consumers? Let’s take a closer look.

Government’s Commitment to Hydrogen The UK Hydrogen Strategy builds on the government’s 10-Point Plan and Energy White Paper’s ambitions to achieve net-zero emissions by 2050. The strategy provides a clear direction on the role of low-carbon fuel sources such as hydrogen in meeting this target. However, it also highlights the uncertainty around the scale and demand we can expect to see in the future. The UK Hydrogen Strategy aims to have hydrogen form between 20-35% of the country’s energy consumption by 2050. Still, the role of hydrogen in buildings remains undecided until 2026, after the hydrogen village trial in 2025. Growing Infrastructure and Capability The immediate focus of the UK Hydrogen Strategy is on growing the infrastructure and capability to generate, store, and distribute hydrogen while creating and increasing the demand for hydrogen itself. Two key initiatives have emerged from the strategy to support those researching, producing, and utilizing hydrogen. The first is the £240m Net Zero Hydrogen Fund, which provides co-investment for new production capacity. The second is the Hydrogen Business Model, which encourages producers with revenue support leveling up the cost of hydrogen against existing fuels in the short term.

Why Hydrogen? Hydrogen is seen as a critical technology in facilitating the UK’s pathway to achieving its net-zero goal. It offers several benefits, including:

  • A green fuel source: Hydrogen produces no CO2 emissions when burned, creating only water vapor and heat.
  • Easy to store: Hydrogen can be compressed, held in salt caverns, or liquefied, making it easy to store for use.
  • Energy potential: Hydrogen contains a large amount of energy and gives comparable high efficiencies to condensing natural gas boilers today.
  • Utilizing the existing infrastructure: Hydrogen can utilize and be delivered using the existing gas network infrastructure, making it one of the more cost-effective routes to decarbonizing heating.

Investment in Production Capacity Despite the benefits of hydrogen, there are still many challenges in delivering it, so investment in production capacity and interventions that target support and regulation across the wider value chain are required. One potential barrier to the implementation of hydrogen is cost, as it is currently unknown how this will compare to natural gas. However, with green hydrogen requiring electricity for production, and electricity costs currently three times higher than natural gas, it is clear why the hydrogen business model is needed to be reviewed and managed for hydrogen to become a significant fuel source of the net-zero energy market. Increasing Demand across All Sectors of the Economy By 2030, hydrogen will start to play an important role in decarbonizing many sectors, with the government’s ambition of 5GW low carbon capacity by 2030 and the decarbonization of existing hydrogen production. Sectors that can benefit include polluting and energy-intensive industries like chemicals and oil refineries, heavy and long-distance transport, such as shipping, HGV lorries, and trains, and provides flexibility to power generation, helping all these sectors move away from fossil fuels. Hydrogen is likely to be fundamental to achieving net-zero in the wider transport industry and industrial sectors and are crucial early markets for hydrogen by 2030. Hydrogen-ready boilers that can burn either natural gas or, via a conversion, 100% hydrogen, can provide a direct replacement for an existing natural gas boiler when the gas distribution networks move. Hydrogen-ready boilers are currently in prototype stage, but it is anticipated that they will become fully approved for use in the coming years.

The government plans to consult later this year on the case for enabling or requiring new natural gas boilers to be easily convertible to hydrogen, i.e., ‘hydrogen-ready’ by 2026. The consultation will also look more widely at heating to find the best ways to continue to reduce emissions from gas heating systems over the next decade.

The Road Ahead The UK Hydrogen Strategy presents an exciting opportunity for businesses, investors, and consumers alike.

One of the key challenges is the need for investment in production capacity and interventions that target support and regulation across the wider value chain. Another challenge is the uncertainty around the scale and demand for hydrogen in the future. Nevertheless, the potential benefits of hydrogen, including its green fuel source, easy storage, energy potential, and the ability to utilize existing infrastructure, make it an attractive option for achieving net-zero emissions in the UK.

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The UK Hydrogen Strategy provides clear direction on the role of hydrogen in achieving net-zero emissions by 2050. While there are still challenges to overcome, the potential benefits of hydrogen are significant, particularly in heating, transport, and industrial sectors. Investment in production capacity and interventions that target support and regulation across the wider value chain are needed to deliver hydrogen at scale. With the right investment and support, hydrogen has the potential to become a significant fuel source of the net-zero energy market and a key driver of the UK’s transition to a low-carbon economy.

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