Developing Scotland's hydrogen economy: statement by the Energy Minister

Statement given by Energy Minister Paul Wheelhouse to the Scottish Parliament on Thursday 11 February 2021.

Hydrogen is rapidly emerging as a sustainable solution for the decarbonisation of the economy and a key piece of the energy transition picture – a view now held in Scotland, Europe, South East Asia and around the world.

On 21st December 2020 we became the first country in the UK to publish a Hydrogen Policy Statement, underpinned by independent analysis, that sets out how we can make the most of Scotland’s massive potential in this new sector - and I am pleased to talk today about hydrogen and its role in decarbonising our energy systems and our ambition for the future hydrogen economy in Scotland.

Hydrogen has a potentially very important role to play in achieving net zero – and we also believe that Scotland’s abundant natural resources - natural, human and physical - will support the establishment of a thriving hydrogen sector here, in Scotland, and in the emerging global hydrogen market.

This view is supported by our extensive engagement, assessment and analysis from three studies that we commissioned over the last year.  The Scottish Hydrogen Assessment, the Scottish Offshore Wind to Green Hydrogen Opportunity Assessment and the Deep Decarbonisation Pathways for Scottish Industries Study are key reports which have provided a comprehensive evidence base for our hydrogen policy statement.

And we are not acting in isolation - the European Union set a strategic objective to install at least 6 GigaWatts of renewable hydrogen electrolysers producing up to 1 million tonnes of green hydrogen in the EU by 2024 and 40 GigaWatts producing up to 10 million tonnes of green hydrogen by 2030.

The UK Government’s recent 10 point plan for a green industrial revolution included setting a target of 5GW of low-carbon hydrogen production capacity by 2030 and we expect a UK hydrogen Strategy to be published in 2021.

In 2020, the Government of Germany committed 9 billion euros of funding to their hydrogen strategy over the next five years closely followed by the French Government who have committed 7 billion euros of funding to delivery of France’s hydrogen strategy.

The 6th Carbon Budget Report from the Committee on Climate Change suggests that low-carbon hydrogen production will scale up to 90 Terra Watt hours by 2035 - that is nearly a third of the size of the current power sector in the UK.

Presiding Officer, in our Hydrogen Policy Statement we set a vision for Scotland to become a leading Hydrogen Nation.

We believe that producing clean hydrogen and showing that it can be used to meet challenging energy demands from industry, transport and heat sectors will also be a key part of the next stage of  Scotland’s energy transition pathway.

From our assessment, it is clear that hydrogen is not just an energy and emissions reduction opportunity; it could also have an important role in generating new economic growth for Scotland by creating new jobs, and significant just transition opportunities, for example in the export of hydrogen  and associated technologies.

Our hydrogen policy statement is aligned to the Scottish Government’s Climate Change Plan update and our climate targets are underpinned by our commitment to a just transition, that supports sustainable economic growth and jobs.

Our policy statement confirms our support for the strategic growth of a strong hydrogen economy in Scotland, focusing our efforts on supporting the development of Scotland’s hydrogen production capability to meet an ambition of at least 5GW of renewable and low-carbon hydrogen production capacity by 2030, capable of producing up to 27 Terrawatt hours of energy, and we would seek to ensure at least five times this - or 25GW of hydrogen production capacity - by 2045.

In terms of the scale of our ambition it is worth noting that our plans for an  installed capacity of 5 Giga Watts of hydrogen production by 2030 are the same as the installed capacity target set by Germany, clearly a much larger country with a much larger industrial base. 

We have confidence in setting such a high ambition due to Scotland’s vast resources in onshore and offshore wind, wave and tidal and hydrogen’s potential to unlock more of these renewable resources and improve the competitiveness of hydrogen production in Scotland.

Scotland’s company base, skills and assets in the oil and gas, offshore wind, and energy systems sectors will also add value and bring the transition opportunity that will be a critical part of building Scotland’s hydrogen economy.

We are in a climate emergency and pace is vital and with that in mind we have, in addition to existing funding programmes, committed £100 million of the £180 million of new funding in the Emerging Energy technologies Fund towards the development of our hydrogen economy over the next five years alone – which will be implemented through our Hydrogen Action Plan, due for publication in 2021.

We believe that both Green hydrogen and Blue hydrogen will play an increasingly important role in our energy transition to net zero and it is important that Carbon Capture Storage systems are established to support the production of blue hydrogen by the mid 2020’s.

Our Hydrogen Policy sets out our continued support for the demonstration, development and deployment of hydrogen and we are also committed exploring the how we can drive forward the 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 and we will seek to exploit these technologies for supply chain development opportunities.

International collaboration will be key to the development of hydrogen markets and in the policy statement we committed to actively seek international collaboration in the development of our shared hydrogen economy and the Hydrogen Action Plan will set out how we seek to develop Scotland’s potential to export significant quantities of hydrogen.

Carrying on from our wide ranging assessment of hydrogen in 2020 we continue to explore our hydrogen potential and today I can announce the commencement of a project to examine Marine Vessel Hydrogen Transportation and Storage.

This collaborative project reflects the opportunities for hydrogen development and energy transition in our regions and is jointly funded by the Scottish Government , the Port of Cromarty Firth, Shetland Island Council, the Oil and Gas Technology Centre, Global Energy Group, ERM  and Pale Blue Dot. We expect this study to conclude its report in the summer of this year.

Presiding Officer, the pace of industry-led hydrogen projects in Scotland is accelerating and I am pleased to inform members today that Scottish Power, through their recently launched Green Hydrogen Business, have signed an agreement with Global Energy Group at their Port of Nigg site to work together to identify how green hydrogen would be generated at site.

This project opens a window for us into how hydrogen can be viewed as playing an integrator role in our energy and industrial systems.

I recognise that it is crucial that Scotland and Scottish companies benefit fully from our development of hydrogen. Scottish content will be central  to the sustainable growth of this new sector and the development of our supply chain will play a critical role in shaping and defining our approach to the hydrogen action plan.

And we will support the transition and growth of Scotland’s emerging hydrogen supply chain, embedding it within our new Supply Chains Development Programme, led by my colleague Ivan McKee, and including the development of skills and manufacturing capacity, that can play a significant role in the hydrogen economy both domestically and internationally.

We cannot achieve our hydrogen ambitions alone and we will work closely with industry going forward to design supportive policy and regulatory environments to support hydrogen production at scale.

Of course, Presiding Officer, many of the regulatory and legislative levers required are determined at a UK level and we are therefore committed to closely engage with the UK Government on the development of UK policy and we urge them to move quickly and decisively on the development of a UK policy and regulatory frameworks for hydrogen and to make the important decisions needed on the future of the gas grid and on business models and market mechanisms which will underpin the hydrogen economy - all of which are important for raising market certainty and boosting investor and consumer confidence.

Our funding of £6.9 million towards Scottish Gas Networks (SGN) H100 Fife project has now leveraged a further £18 million of funding from Ofgem.

This is a flagship demonstration project which will deliver a first-of-a-kind 100% hydrogen heat network, supplying 300 domestic properties with clean, green hydrogen heating. The project will be a critical step towards understanding the role hydrogen can play in decarbonising heat using the gas network and demonstrating technology such as hydrogen enabled boilers.

Presiding officer, I would like to re-emphasise the following key points:

  • Scotland has abundant natural resources and we believe we have a competitive advantage in the components necessary to grow a strong hydrogen economy, supporting jobs and GVA growth, and developing new industrial opportunities on a significant scale.
  • Our reputation for excellence in energy, our innovative oil and gas supply chain and our strong onshore and offshore wind sectors, are key to our achieving a just transition to a low carbon and, ultimately, net zero age. Both our oil and gas and renewable energy sectors will be critical to establishing stable and secure production of affordable large-scale hydrogen.
  • We believe hydrogen will play a very important role in our transition to a net zero electricity system, directly complementing renewable generation, and providing new ways and opportunities to use, transport, integrate and store that energy.
  • And we believe that the development of a hydrogen economy with a strong export focus is a very substantial economic opportunity for Scotland. Many of our neighbours in Northern Europe are looking to Scotland to export to them the hydrogen they will need for their own decarbonisation journeys, while the rest of the UK is also likely to be a significant net importer.

Presiding Officer, no one fuel or technology is by itself the solution to climate change, but hydrogen has the potential to be an important part of a decarbonised energy system, and a significant and valuable export opportunity.  We are committed to supporting the emerging hydrogen sector in Scotland while also maximising the ‘new-industry’ benefits that the production of hydrogen may bring. So Presiding Officer,  and I look forward to seeing Scotland grasp the opportunities a hydrogen economy presents to secure a just transition to net zero. 

Thank you.

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