As 2021 ended with the publication of the UK’s Hydrogen Strategy, the hydrogen industry’s focus in 2022 was delivery.
The UK hydrogen industry has made good progress in laying the groundwork for several world-leading projects.
However, political uncertainty including a short delay to the Energy Security Bill, and an increasingly competitive global hydrogen landscape have presented challenges that the industry will have to face in 2023.
Hydrogen is still near the beginning of the road, but it’s poised to make major advances in the years to come.
As other countries including the United States, European Union and Canada implement policies to spur growth in their hydrogen sectors, the UK must play to its existing strengths to capitalise on the ambition and investment potential in hydrogen.
Here are some key developments Hydrogen UK will be looking out for in 2023:
Passing the Energy Security Bill: While it was paused for a few months, the Energy Security Bill returned to Parliament in December 2022 signalling some good news for the industry. The UK is unfortunately now playing catch-up following the United States’ recent Inflation Reduction Act. The Energy Security Bill must be prioritised and urgently passed in Parliament to support the establishment of a low-carbon hydrogen economy, a competitive allocation process, and a hydrogen production levy that will kickstart the industry.
Next steps on hydrogen heating: The Energy Security Bill won’t only support hydrogen production but will allow the exploration for hydrogen in decarbonising the UK’s heat demand. Two areas, in Ellesmere Port and Redcar, have been identified as potential locations for a hydrogen heating village trial, and we hope to see major developments on this project in 2023. The Government’s recent announcement of a consultation on hydrogen boilers is another step in the right direction.
Providing final investment decisions on the first large scale hydrogen projects: The UK is in a great position being home to many exciting world-class projects. These projects are investable and ready to go, pending the allocation of the Hydrogen Business Model funding. With funding expected to be allocated next year, we can expect projects to be taking final investment decisions over the next 12 to 18 months. This is exciting as it will allow projects to go from plans on paper to spades in the ground.
The future of hydrogen blending: The Government has committed to deciding on whether to allow hydrogen to be blended into the gas grid in 2023. This will be important for supporting the first hydrogen production projects by providing a reliable demand sink during the early stages when demand is less reliable and large-scale storage isn’t available. It could also deliver decarbonisation of one of our biggest energy assets. Government is currently undertaking a value for money case which will be used to underpin the decision.
Greater recognition of hydrogen in delivering energy security: The rhetoric around hydrogen has often pitted hydrogen against electric. The recognition that this choice isn’t binary, and that both need to be used where it makes sense to achieve net zero will continue to emerge. Hydrogen must be further recognised as a factor in the Government’s efforts to establish a secure domestic energy supply.
Increasing investment globally in hydrogen technologies: Governments around the world are now racing to implement policy frameworks that de-risk assets in the hydrogen value chain and make hydrogen a more reassuring investment. As more of these policies are introduced, we can expect increased R&D funding in hydrogen.
Approving Track 2 clusters: The Government’s Ten Point Plan promises two CCUS clusters by the mid-2020s, and a further two by 2030. Big decisions on both sets of clusters in 2023 are expected. The confirmation of Track 1 clusters is overdue, and a total of 20 projects have been shortlisted for possible support from Government. Industry pressure is growing on the future of Track 2 clusters. Given the urgent requirement to decarbonise our industrial sector and the quality of projects coming forward with strong local support, the Government should be supporting more than two additional CCUS clusters in 2023.