Offshore wind to green hydrogen: opportunity assessment

1 introduction

1.1 General

Wind power has already become a critical component of Scotland’s electricity network, responsible for supplying 39.4% (18.9 TWh) of all electricity generated in the country in 2018, equivalent to 54.7% of Scotland’s gross electricity demand (34.7 TWh). Onshore wind power has been particularly important source of new renewables capacity in recent decades, representing more than 80% (6.2 GW) of the 7.7 GW of renewables generation deployed in Scotland over the period 2009 to 2018.

Offshore wind is also emerging as an important source of future power generation for Scotland, offering the potential for very large-scale deployment at an increasingly competitive £/MWh price point. Scotland’s current offshore wind generation capacity (894 MW) is much smaller than its onshore wind capacity (8,357 MW), but the nation has a significant pipeline of around 7.5 GW of projects under construction, with offshore consent, or with a seabed lease. This pipeline is set to grow substantially following the completion of the first ScotWind Leasing round, which will enable up to 10 GW of new offshore wind capacity via award of Option Agreements for project development.

Onshore and offshore wind will be vitally important for the ongoing decarbonisation of the Scottish and UK power network, as reflected by the UK Government’s commitment to support both technologies via future Contracts for Difference (CfD) auction rounds – the government’s main mechanism for supporting low-carbon electricity generation. The extensive UK offshore wind resource also offers considerable potential to support decarbonisation of other facets of the UK energy system via increased electrification and/or the displacement of existing fossil fuel-based systems with hydrogen alternatives fuelled by green hydrogen produced from offshore wind. It should be noted that although this report focuses solely on offshore wind, Scotland could also harness its significant marine renewables resources (waves and tidal) for green hydrogen production in the future.

The route to market for offshore wind projects supplying electricity to the grid is already well established. However, there is growing interest from industry and policymakers in exploring and enabling routes to market for the large-scale production of hydrogen from offshore wind, including for potential export. This opportunity was highlighted by the recent Offshore Renewable Energy Catapult (OREC) ‘Offshore Wind and Hydrogen: Solving the Integration Challenge’ report, which estimated that up to 240GW of offshore wind could be deployed in the UK by 2050 for the purpose of producing green hydrogen for export to Europe.

The green hydrogen export opportunity is also evident in the recently released German National Hydrogen Strategy (German Federal Government, 2020), which states that “around 90 to 110 TWh of hydrogen will be needed by 2030” and outlines plans for “up to 5GW of [domestic] electrolyser generation capacity including the offshore and onshore energy generation facilities” to help meet this demand. The strategy notes, however, that “most of the hydrogen needed will have to be imported”, describing “several places across the EU where large quantities of renewables-based electricity are being generated” as offering great potential to meet this demand. Considering that Scotland is already a net exporter of renewable power indicates that it could also become an exporter of green hydrogen in the future to the rest of the UK and other energy markets, such as Germany.

1.2 Wind to Green Hydrogen Overview

The current forecast from the UK Committee on Climate Change (Committee on Climate Change, 2018) for global low-carbon hydrogen demand in 2030 varies between 35-1,100 TWh/year, scaling up to 300-19,000 TWh/year by 2050. Considering that more than 95% of global hydrogen supply is currently produced from fossil fuels (2,800 TWh/year (IEA, 2019) the opportunity for zero-carbon hydrogen produced by large-scale electrolyser systems is enormous.

Scotland is one of the leading nations in green hydrogen, having developed the world’s first hydrogen production system from tidal energy (Surf'n'Turf, 2017), incorporating anaerobic digestion (AD), combined heat and power (CHP) and electrolysis to produce and utilise hydrogen and oxygen as part of the Outer Hebrides Local Energy Hub (OHLEH). These are examples of multiple pioneering Scottish hydrogen projects, which also include the world’s first hydrogen-powered double decker bus fleet in Aberdeen. With increasing domestic and international demand for hydrogen, offshore wind coupled with electrolysis presents a green solution with potential to address large scale demand. Scotland has a growing offshore wind sector, but with increased requirements for grid infrastructure upgrades and curtailment risk, hydrogen production could act as an alternative revenue stream to support continued offshore wind development, whilst serving to decarbonise ‘difficult-to-abate’ sectors.

Figure 1.1 shows key components of Scotland’s potential future hydrogen system.

1.3 Project Scope

This study was a multifaceted assessment of the Scottish opportunity to produce green hydrogen from offshore wind.

The key components of the scope of work were as follows:

• To asses existing and potential demand for green hydrogen in Scotland, and to explore how this demand is likely to change and evolve over a timeframe to 2045.
• To examine the markets that represent the greatest opportunity for Scottish green hydrogen, and identify key demand hubs in continental Europe.
• To provide clear understanding of the Scottish offshore wind resource coupled with green hydrogen production, and how these two clean technologies can enable green hydrogen production at scale.
• To deliver a granular supply chain database of Scotland based companies with existing or potential capabilities which will be crucial to decarbonise carbon intensive sectors not only in Scotland, but also abroad by exporting surplus hydrogen to Europe. . NB the scope of this study excluded consideration of potential for Scottish export of hydrogen sector goods and services.
• To build a techno-economic model to calculate hydrogen production from offshore wind.
• To outline key policy incentives to make hydrogen cost competitive with other dispatchable energy sources (fossil fuels).

1.4 Work Package Overview

The scope of work was split into three primary work packages, addressing three key themes:

• Market Demand. The potential market demand for hydrogen within Scotland, the rest of the UK and Europe and how these might develop up to 2045. What consumer parity prices might be now, and in 2032 once the energy transition is well-underway. The scope comprised:
  • Undertaking an extensive desk-based review of relevant reports and policy documents, both Scotland-specific and international.
  • Using this information to understand the scale of demand market for green hydrogen between the late 2020s and 2045/50.
• Scotland’s Potential. What scale of production of green hydrogen might be obtained from Scotland’s offshore wind resource, and how this might develop up to 2045. The maturity of Scotland’s supply chain capability to deliver green hydrogen. How Scotland’s extensive existing oil and gas infrastructure might be redeployed to facilitate production of green hydrogen. The scope comprised:
  • Defining the current green hydrogen landscape in Scotland.
  • Identifying and engage with key industry stakeholders to create a robust supply chain database of Scottish businesses that are already active or considering entering the green hydrogen sector.
  • Assessing the Scottish supply chain opportunity and identify the actions to be taken that will maximise the potential benefits.
• Production Models. What cost and LCOH may be expected for various potential project configurations and, based on these, what interventions and mechanisms may be needed to enable the development of a green hydrogen economy. The scope comprised:
  • Creating a techno-economic model to identify and evaluate the key economic metrics of hydrogen production from offshore wind.
  • Using this model to understand the scale of potential incentives required for green hydrogen to compete with the current use of fossil fuels.
  • Using these findings to identify future policy mechanisms to achieve wider economic, social and environmental benefits of hydrogen economy in Scotland.

1.5 Abbreviations

AD
Anaerobic Digestion

BBL
Balgzand Bacton (pipe)Line

bcm
Billion cubic metres

BEIS
Department for Business, Energy & Industrial Strategy (UK Government)

BEV
Battery Electric Vehicle

BSUoS
Balancing Services Use of System (charge)

CO₂
Carbon Dioxide

CAPEX
Capital Expenditure

CCS
Carbon Capture and Storage

CCUS
Carbon Capture Use and Storage

CfD
Contract for Difference

CHP
Combined Heat and Power

CnES
Comhairle nan Eilean Siar

DECEX
Decommissioning Expenditure

DEVEX
Development Expenditure (pre-FID)

EMEC
European Marine Energy Centre

EU
European Union

EV
Electric Vehicle

FCEV
Fuel Cell Electric Vehicle

FCHJU
Fuel Cells and Hydrogen Joint Undertaking

FRP
Fibre Reinforced Plastic

GW
Gigawatt

GWh
Gigawatt Hour

H2
Hydrogen (strictly H₂)

HHV
Higher Heating Value

HIE
Highlands & Islands Enterprise

HMRC
Her Majesty's Revenue and Customs

HPA
Hydrogen Purchase Agreement

IEA
International Energy Agency

in
inch

IRENA
The International Renewable Energy Agency

IUK
Interconnector UK

kg
kilogram

km
kilometre

LCO
Low Carbon Obligation

LCoE
Levelised Cost of Energy

LCoH
Levelised Cost of Hydrogen

LHV
Lower Heating Value

LNG
Liquefied Natural Gas

LOA
Length Overall (ship)

LOHC
Liquid Organic Hydrogen Carrier

MGO
Marine Gas Oil

mpg
miles per gallon

MW
Megawatt

MWh
Megawatt hour

NECCUS
North East CCUS

NH3
Ammonia

NPD
Norwegian Petroleum Directorate

NPF
National Performance Framework

NPV
Net Present Value

NTS
National Transmission Service (gas network)

O&G
Oil and Gas

O&M
Operations and maintenance

OFTO
Offshore Transmission Owner

OGTC
Oil and Gas Technology Centre

OHLEH
Outer Hebrides Local Energy Hub

ONE
Opportunity North East

OPEX
Operating Expenditure

OREC
Offshore Renewable Energy Catapult

OWF
Offshore Wind Farm

PEM
Polymer Electrolyte Membrane (electrolyser)

POX
Partial Oxidation

PPA
Power Purchase Agreement

RFTO
Renewable Transport Fuel Obligation

ROC
Renewable Obligation Certificates

SE
Scottish Enterprise

SG
Scottish Government

SGN
Scottish Gas Networks

SHA
Scottish Hydrogen Assessment (study)

SHFCA
Scottish Hydrogen & Fuel Cell Association

SMR
Steam Methane Reforming

SWOT
Strengths, Weaknesses, Opportunities, Threats

TNEI
The Northern Energy Initiative

TNUoS
Transmission Network Use of System (charge)

TWh
Terrawatt Hour

UK
United Kingdom

UNFCCC
United Nations Framework Convention on Climate Change

US
United States

VAT
Value-Added Tax

VLGC
Very Large Gas Carrier

WLTP
Worldwide Harmonised Light Vehicle Test

WP
Work Package

1.6 Unit Conversion Tables

1.6.1 Hydrogen

Scale	Unit of Measurements
	Energy	Volume	Weight
Annual Cumulative Flow	1 TWh	12.6 BCF	0.03 Mte
Daily Flow	1 GW	302.4 MMSCFD	717.5 Te/d

1.6.2 Ammonia

Scale	Unit of Measurements
	Energy	Volume	Weight
Annual Cumulative Flow	1 TWh	7.9 BCF	0.16 Mte
Daily Flow	1 GW	190.2 MMSCFD	3,840 Te/d