It was great to attend RenewableUK's Green Hydrogen Conference last Wednesday. Once again Burges Salmon sponsored the event and there is clearly a huge amount of work going on in industry to unlock the potential of the low carbon hydrogen economy. Here is a summary of some of the key messages from the day:
1. 2023 must be a year of action: The Government’s ambition for 10GW of low carbon hydrogen production capacity by 2030 with at least half coming from electrolytic hydrogen is welcome, but in order to achieve this, 2023 must be a “year of action”. Whilst 20 projects (with a total capacity of 408MW) have been shortlisted for the first electrolytic hydrogen allocation round (HAR1), that process must move quickly in order to bring forward investment and construction. In particular, the industry is awaiting the publication of the full Low Carbon Hydrogen Agreement, as without this, it is extremely difficult to finalise contracts with offtakers and supply chain (please see here for a summary of the key aspects of the LCHA as set out in heads of terms document published in December).
2. Hydrogen Business Model welcome, but some changes are needed: Whilst the HBM support is welcomed, there are a number of challenges in its terms that industry would like to see addressed. In her presentation, Susan Stead of SSE picked out some key elements of the LCHA terms that are causing developers concern, including the lack of electricity prince indexation and the exclusion of risk taking intermediaries. Negotiation on these (and other LCHA terms) are likely to be key in terms of the success of these pioneer projects.
3. Transport and storage are key elements of the green hydrogen value chain: Production cannot happen in a vacuum. Developers needs to understand the policy framework in relation to transport and storage. The government response to its Hydrogen transport and storage infrastructure consultation is expected in Q2 2023 and DESNZ recognises that introducing legislation to underpin the design of transport and storage business models will be key, however Government needs to move quickly, these are substantial projects with long lead times.
4. Supply chain needs certainty: In order for supply chain to spend time and resources here in the UK, it needs the certainty of a consistent pipeline of projects. If the Government does not provide this, the UK risks being left behind due to ambitious tax incentives and subsidies offered in other jurisdictions, which may attract investment and prospective suppliers away from this country. RenewableUK published its latest paper, Surveying the UK’s Green Hydrogen Supply Chain Capability, on the day of the conference which warns that the UK stands at a critical juncture.
5. Education is key: Industry needs to communicate often and effectively with both policy makers and the public to ensure that the scale of the opportunity that the low carbon hydrogen economy represents. DESNZ, in their opening remarks, spoke about the creation of 12,000 UK jobs and unlocking £9 billion of investment. It is clear that there is huge opportunity provided the policy framework across the hydrogen value chain can keep pace with Government’s stated ambitions.
We are currently working on a number of low carbon hydrogen projects. Please take a look at our website, as well as our recent blog Green Hydrogen Projects: Top 10 Tips for Developers, Funders & Investors or get in touch with one of the team.