Hydrogen action plan: draft

Introduction

Scotland was amongst the first countries in the World to declare a climate emergency and we understand the urgency of moving our economy and society to generating net zero greenhouse gas emissions.

Our world-leading climate change targets, to achieve net zero greenhouse gas emissions by 2045 and a 75% reduction by 2030, against the 1990 baseline, mean that across our economy we will need to move at an unprecedented pace to deliver the innovation, investment, regulation and the market environment that will enable the required step change towards net zero.

Hydrogen could be an important tool to help lower our greenhouse gas emissions and to minimise our impacts on the climate. The sixth Carbon Budget Report from the Committee on Climate Change suggests that hydrogen production will scale up to 90TWh hours by 2035 – that is nearly a third of the size of the current power sector in the UK.

Hydrogen Economy in Scotland

Whole Systems
Environmental; regulation; public perceptions

Production
Offshore and onshore production; commercial scale

Distribution
Export infrastructure; shipping; pipelines; ammonia, LOHC

Storage
Geological; repurposing of O&G infrastructure

Trade
Export potential; international co-operation; climate leadership

Use in Buildings
Blending; 100% Green; commercial

Use in Industry
early industrial decarbonisation; synthetic fuels

Use in Transport
Buses; trains; shipping; aviation; freight

Hydrogen Production Definitions

Renewable hydrogen is produced using renewable electricity and is zero carbon.

Low-carbon hydrogen is produced by reforming natural gas in conjunction with carbon capture and storage and is very low-carbon.

Biomass gasification with CCS for the production of hydrogen is a less developed negative emissions technology but nevertheless could become part of the energy mix.

Unabated Hydrogen is produced from the reforming of natural gas. This process produces both hydrogen and carbon dioxide which is emitted to the atmosphere.

We believe that producing renewable and low-carbon^[1] hydrogen at scale and showing that it can be used to meet challenging energy demands from difficult-to-decarbonise sectors will be a key part of the next stage of Scotland's energy transition pathway.

Hydrogen provides a sustainable alternative to burning fossil fuels and can be used to decarbonise many parts of our economy, including: industry, transport, power and heat. In the transport sector, for example, hydrogen can provide the zero-carbon energy-dense fuels required to help decarbonise key parts of the sector, such as larger vehicles with heavy duty cycles including lorries and buses, agricultural vehicles, trains, marine vessels and aviation. Transported through the gas grid it can help decarbonise our heat demand at home and in our commercial premises. Also, for energy-intensive industry, switching to renewable and low-carbon hydrogen is considered one of the few viable options for significant decarbonisation in the next decade.

We are exploring the role of hydrogen in an integrated system to better understand the opportunities hydrogen presents to deliver large scale and long-term energy storage for the energy system, and the potential to replace or augment the critical balancing and resilience services that natural gas storage provides to the energy system today. Hydrogen could play a wider role in our journey to a zero-carbon electricity system both through the production of renewable hydrogen from our huge renewable resource when demand for power is low, as well as the potential for hydrogen turbines to meet demand and provide valuable system services – replicating the function currently provided by fossil fuel-powered gas and diesel generators.

We will take a regional approach to our support for the development of the hydrogen economy in Scotland to recognise the different natural assets, skills and potential applications for hydrogen across different geographic areas of Scotland. Hydrogen may play a key role in decarbonising our industrial clusters, supporting the just transition of the workforce in high carbon sectors in the North East of Scotland, and provide opportunities for our islands and rural communities to maximise the benefit of their vast access to renewable resources. A key focus of this action plan will be to support the development of Regional Hydrogen Energy Hubs, described in more detail in Section 1, that will help to deliver the benefits of hydrogen in each of these regions.

We recognise that there are a number of challenges to realising the potential of hydrogen in our energy transition and the size of global markets, including the high cost of hydrogen production in comparison to high carbon fuels. There is significant potential for long-term cost reduction through innovation, economies of scale and access to low-cost renewable electricity; however, the scale of hydrogen's role in our energy system will ultimately depend on a number of factors including its cost relative to its alternatives. We will build on existing research to establish an expected cost trajectory for hydrogen produced in Scotland.

In line with our statutory obligations, a Strategic Environmental Assessment has been carried out on this Hydrogen Action Plan. The recommended mitigation and enhancement actions will be taken into account in the implementation of the Action Plan including in the development of the regulatory, planning and consenting framework.

Our Hydrogen Policy Statement described how hydrogen has a potentially very important role to play in Scotland achieving net zero.

The Scottish Government Hydrogen Policy Statement:

• confirmed support for the strategic growth of a hydrogen economy in Scotland.
• set out an ambition of 5GW of renewable and low-carbon hydrogen production by 2030 and 25GW by 2045.
• committed £100 million funding towards the development of our hydrogen economy.
• confirmed that both renewable and low-carbon hydrogen will play an increasingly important role in our energy transition to net zero in 2045, the need to see as much renewable hydrogen in the energy system as quickly as possible and support the establishment low-carbon hydrogen production at scale in the 2020s, linked to Carbon Capture and Storage (CCS).
• set out how Scotland's abundant natural resources, skills and supply chain offer the potential for large scale production of renewable hydrogen from offshore wind to be a key driver of the hydrogen economy in Scotland.
• confirmed support for the demonstration, development and deployment of hydrogen.
• committed to drive technological progress and advance innovation by unlocking public and private funds for innovation development, and support demonstration for key hydrogen technologies, such as fuel cells and electrolysers.
• recognised the need for pace – the need to start now and grow quickly to capitalise on opportunities within the domestic and global hydrogen market.
• committed to actively seek international collaboration in the development of our shared hydrogen economy and fully explore our hydrogen export potential.
• committed to support the transition and growth of Scotland's existing supply chain, including in the development of skills and manufacturing capacity, that can play a significant role in the hydrogen economy both domestically and internationally.
• committed to exploring the opportunities for negative carbon hydrogen, combining the potential to use bioenergy to produce hydrogen with CCS.
• committed to engage with the UK Government on the development of a UK policy and regulatory framework for hydrogen, business models, market mechanisms, carbon pricing, feed in tariffs, fuel economy standards, renewable fuel standards and zero emission vehicle mandates – all of which are important for raising market certainty and investor confidence.

This draft Hydrogen Action Plan sets out what the Scottish Government will do and how we will work with others over the next five years to implement the strong strategic approach required to support the development of the hydrogen economy in Scotland, to support our efforts to reduce greenhouse gas emissions from our energy system, industry, homes and transport, while ensuring a just transition.

The actions in this plan are designed to:

• drive Scotland's hydrogen production capability to meet an ambition of 5GW of renewable and low-carbon hydrogen by 2030 and 25GW by 2045.
• address current barriers to the uptake of hydrogen including high production costs.
• support the growth of Regional Hydrogen Energy Hubs.
• encourage demand for hydrogen by supporting hydrogen use and developing our supply chain capability and export potential.
• secure broad economic benefit from public sector and private sector support for development of regional hydrogen production and use.
• encourage the development of a strong hydrogen sector in Scotland which supports a just transition to net zero.

Just Transition

We are committed to a just transition to net zero, which means working with people, businesses and communities across Scotland to ensure they have a clear role in decision making, that they can access support and advice, that costs to users are kept as low as possible, and that the benefits of the transition are spread fairly.

The growth of a strong hydrogen sector offers significant opportunities for regional and local economic benefit, creating new high-quality green jobs in our rural communities, islands and cities, and new opportunities for those currently working in high carbon sectors. Our analysis indicates that a strong hydrogen sector in Scotland could support up to 300,000^[2] jobs across all skill levels by 2045. Many of the skills required already exist in our renewable and offshore industries.

As is outlined in Part 2 of this document, we will work with key partners to provide targeted support to develop skills programmes and to help people, companies and communities to connect to the opportunities created by the growing hydrogen economy. This includes a commitment to support those with relevant skills in high-carbon sectors to transition to new green jobs, as well as support for the development of new skills. We will set out more detail on our approach to supporting a just transition in our forthcoming Energy Strategy and Just Transition Plan in 2022. This plan will consider hydrogen as part of a whole-system approach to the just transition, and will be supported by our oil and gas evidence base.

Scotland's unique selling point is its natural resources, infrastructure and skilled energy workforce which could enable it to become a low-cost producer of hydrogen in Europe. Scotland has an abundance of wind, both onshore and offshore, tides, and reliable water resources, with which to support electrolysis. We also have a highly technical oil and gas sector which is pivoting towards the deployment of hydrogen technology as part of the energy transition.

Our ambition for hydrogen production is closely aligned with our expanding capacity ambitions for both offshore and onshore wind. This is explored further in the Scottish Offshore Wind to Green Hydrogen Opportunity Assessment which was published alongside the Scottish Hydrogen Assessment report^[3] in December 2020. There are also key learnings to be taken from the development of the renewables sector in Scotland for the emerging hydrogen sector.

Onshore Wind

Scotland has excellent onshore wind expertise and is recognised as having one of the best wind regimes anywhere in the world in which to deploy projects. Development of renewable energy presents an immense opportunity for Scotland to lead by example – showing how a clean energy future is possible at home, and as a net exporter of renewable energy, attracting further investment and ensuring our progress to net zero is environmentally and economically beneficial.

The draft Onshore Wind Policy Statement^[4], published on 28 October 2021, sets out the Scottish Government's ambitions for onshore wind in Scotland out to 2030 in the context of our 2045 net zero emissions commitment. It outlines the huge potential for this technology, and assesses the significant economic opportunity of future deployment, particularly in light of green recovery aspirations. Subject to consultation, we are committed to securing an additional 8-12GW of installed onshore wind by 2030.

A strong onshore wind sector will support the development of a range of small- and large scale renewable hydrogen projects. As these hydrogen production projects come on line they will assist the efficiency of the energy system by addressing renewable intermittency with production by electrolysis at times of excess electricity supply. A new Onshore Wind Policy Statement will be published in 2022.

Offshore Wind

Scotland has one of the largest maritime zones in Europe and some of the highest concentrations of wind energy in the world. This makes it a key provider of offshore wind, not only to deliver its own net zero targets but also to help achieve net zero goals for the UK and, potentially, northern Europe. Within Scottish waters, there are currently 2GW of offshore wind farms constructed and a further 4GW in development.

The latest round of offshore seabed leasing, ScotWind, closed in July 2021. This could generate a further 10GW of wind power, and billions in pounds of investment over the next 20 years. Successful bidders will be announced in early 2022 and further regular leasing rounds are planned in the forthcoming years.

A planning round for innovation and targeted oil and gas decarbonisation (INTOG) with the specific purpose of constructing offshore wind farms by 2025/26 to decarbonise oil and gas infrastructure operations, support oil and gas decommissioning, and contribute towards net zero launched on 25 August 2021. INTOG will deliver between 3-4GW of capacity and some projects may have excess capacity beyond powering oil and gas platforms. Where possible, conversion to hydrogen as a form of storage for later use or transfer to another user offers a way to capitalise on that excess and provides potential further opportunities for the Scottish economy through the hydrogen supply chain, supporting the ambition outlined in our Hydrogen Policy Statement of generating 5GW of hydrogen by 2030.

CCS Cluster

The deep decarbonisation of our industrial and electricity sectors will require the timely development of carbon capture utilisation and storage (CCUS), in parallel with the development of hydrogen technologies. These underpin our route to net zero and support a secure and resilient energy system, while supporting employment for the 300,000 people^[5] currently working within our industrial sector, highlighting the importance of a just transition.

The creation of low-carbon hydrogen, utilising carbon capture and storage (CCS) at commercial scale, will establish the opportunities to decarbonise industry, transport and heat, as well as other sectors, and pave the way for establishing the transportation and storage infrastructure to support the growing hydrogen economy in Scotland. CCS also enables negative emissions technologies in the bioenergy sector and for capturing emissions directly from the air through direct air capture (DAC) plants. When hydrogen is produced from a bio-energy feedstock and combined with CCS it can deliver negative emissions. Negative emissions technologies will play a critical role in meeting emissions reduction targets.

The Scottish CCS Cluster encompasses industrial, power, low-carbon hydrogen production and DAC projects, and the CO₂ transport network required for permanent storage of captured emissions. The Scottish Cluster has been awarded the status of 'reserve cluster' in the UK Government's cluster-sequencing bid process along with a commitment from the UK Government to continued engagement with the cluster through Phase 2 of the sequencing process to ensure its development and planning continues. We remain committed to supporting the continued growth and development of the Scottish Cluster to ensure that Scotland reaches its net zero goals by 2045.

An Integrated Energy System

Achieving the deep decarbonisation of industrial energy and heat demand will require large volumes of renewable and low-carbon hydrogen and other decarbonisation solutions to be produced and deployed.

We are determined to ensure the strategy for deployment of these technologies must enable decarbonisation at pace and cannot be used to justify unsustainable levels of fossil fuel extraction or impede Scotland's just transition to net zero.

The growth of renewables and a hydrogen economy are complementary – we need a strong renewables sector to support the timely development of a range of small and large scale renewable hydrogen projects. An integrated energy system, that includes hydrogen, and the establishment of hydrogen production hubs capable of simultaneously servicing transport, heat and industry needs will provide an effective energy integration opportunity for hydrogen. We will aim to provide targeted support to accelerate and maximise the production of renewable hydrogen in Scotland, recognising that the development of low-carbon hydrogen production facilities will provide essential pipeline and compression infrastructure that can be shared with larger scale renewable hydrogen as this comes on line.

It is a vision such as this that is guiding the development of our policies in this Action Plan.

Use of hydrogen can act as a complementary energy source alongside electrification, as well as offering a compelling solution for sectors where full electrification is challenging. This may make it appropriate for industrial applications for energy intensive industries and some forms of transport, including, for example road freight, hydrogen trains on lines which would be very expensive to electrify, buses, and shipping.

We are also undertaking work to identify high-potential areas for the use of hydrogen for heat in Scotland. The first part of this work is underway and will establish an expected cost-trajectory for renewable hydrogen produced in Scotland to 2030 and 2045. This will help develop our understanding of hydrogen demand, potential hierarchy of use and future devolved policy decisions.

Our analysis tells us that in the next five years it is clear that industrial use of hydrogen and the use of hydrogen in the transport sector will create the initial demand for increasing volumes of hydrogen.

Case Study – Whitelee Renewable Hydrogen Project

ScottishPower is developing Scotland's largest renewable hydrogen project at Whitelee Windfarm, the UK's largest onshore windfarm. The 20MW green hydrogen production facility is expected to be consented in late 2021, with up to 8 tonnes of green hydrogen being available in early 2023. This flagship project will be critical in demonstrating the deployment of green hydrogen at scale, building upon Scotland's renewable energy foundations.

The renewable hydrogen facility will be powered by the mix of technologies at Whitelee which includes a new solar farm, battery energy storage system and the existing windfarm. The project would be capable of providing enough zero-emission hydrogen to power up to 550 hydrogen buses to travel from Glasgow to Edinburgh and back again each day.

With the strategic location just south of Glasgow, the scale of production should
ensure renewable hydrogen is available for transport and industrial applications
across the region.

How much Hydrogen is 5GWs?

• Our 5GW ambition by 2030 is for installed production capacity of hydrogen which includes both renewable and low-carbon hydrogen.
• We can translate this to approximately 27.5 TWh which equates to approximately 790'000 tonnes of hydrogen.
• For scale reference, Scotland’s total energy demand per annum is 161 TWh.
• 5GW of hydrogen would produce energy equivalent to 15% of Scotland’s total energy demand.
• Just 1MW of renewable hydrogen production will make enough clean energy to fuel 15 buses for a full year, with 1GW enough to fuel 15,000 buses for a year.
• Just 1MW of renewable hydrogen production provides enough hydrogen to heat the equivalent of 302 homes for a year, with 1GW enough to heat the equivalent of over 300,000 homes for a year.^[6] 5GW would produce enough hydrogen to heat the equivalent of 1.5 million homes.