A Trading Nation - realising Scotland's hydrogen potential: plan for exports

5. Supply Chain

With 60 years of supply chain expertise in the upstream oil & gas industry as well as offshore energy and downstream petrochemicals, Scotland has many of the products, technologies and engineering skills required to accelerate the adoption of hydrogen as a major energy vector.

Significant renewable resources and a large associated pipeline of domestic hydrogen projects, coupled with strong, transferable experience from existing sectors, mean Scotland’s supply chain is well placed to become a leader in the renewable and low-carbon hydrogen sector. This will create opportunities to export skills, capability, and expertise to emerging markets. The vision is for Scotland to be recognised as a trusted partner and reliable provider of supply chain expertise for development of clean hydrogen projects in overseas markets.

With a robust and tested approach to supporting exporters to grow their goods and services into critical international markets, Scotland already has over 150 companies actively involved in the hydrogen sector both domestically and in overseas markets. Around one thousand others have relevant skills and capabilities in delivering products, solutions, and services across the supply chain, many of which are making plans to enter the sector imminently. Through our existing export support ecosystem, we will work with these companies to raise their ambition and increase their focus to diversify, research, identify and access new international trade opportunities in the growing hydrogen sector globally. Our enterprise agencies are already working to support companies with the transition, turning ‘potential’ companies into ‘interested’ companies and ‘interested’ companies to ‘already in H2’ as noted in the chart below.

Source: SE benchmarking study October 2024

The Scottish Government and Enterprise Agencies want to ensure that Scottish companies are strongly positioned to capitalise on the economic opportunities presented by hydrogen both in Scotland and globally. Research, recently commissioned from Arup^[32], provides insight into the key target markets that represent the greatest potential for Scotland to export supply chain capability. Through a data driven assessment of 170 different markets across the globe, the study applied multi-criteria analysis, centred around the three core themes of Ambition, Capability and Alignment, which produced a list of key countries for deeper analysis.

To assess the opportunities for Scotland to export supply chain capabilities, the supply chain model below was used to break down the supply chain into the key segments of the hydrogen lifecycle including production, distribution, storage, and use. For each of these segments, supply chain capabilities were identified across products, services and solutions.

Infographic text below:

• Production

Producing low-carbon hydrogen using electrolysis or CCS-enabled thermochemical.

• Distibution

Delivering hydrogen from production to storage or end-use.

• Storage

Storing hydrogen to help balance supply and demand.

• Use & Offtake

Using hydrogen across a range of sectors, including production of derivatives.

• Products

Physical elements within the supply chain, such as an electrolyser, compressor, or electrical equipment.

• Solutions

Capabilities that directly deliver products, such as manufacturing, construction, or integration capability.

• Services

Auxiliary capabilities that support the delivery of products, such as engineering, environmental, operations & maintenance or financial services.

Scottish companies have played key roles in delivering some of Scotland’s leading, early hydrogen demonstrator projects and are now preparing to scale up rapidly in response to the growing pipeline of projects in planning or under development. Scotland’s supply chain has relevant and transferable strengths built over many decades that include equipment manufacturers, integrators and fabricators, experience with transport and hydrogen refuelling stations, development engineering, operational and maintenance services, and project management. All of these position our company base very well to respond to the anticipated roll-out of hydrogen production, transportation, storage, and utilisation infrastructure domestically and in international markets.

Development of Scotland’s hydrogen supply chain is currently being monitored and supported across the Enterprise Agencies in a cross-organisational way that helps identify relevant Scottish supply chain companies when working with project developers and inward investors. Those with products, services and expertise that are in demand across the global hydrogen sector can then be assisted to access opportunities in key international markets.

5.1 Markets and Opportunities

Scotland, with its stable political system and established trading history, is in a good position to target export opportunities for supply chain goods and services in key overseas markets such as the existing key export markets United States, France and Germany and emerging markets identified as Mexico, Brazil, Canada, Malaysia, Indonesia, China, Norway, Denmark, UAE, Saudi Arabia, Oman and Namibia.

The international market assessment and prioritisation exercise completed by Arup identified a number of priority markets for the export of goods and services from the Scottish supply chain, alongside existing key export markets such as the EU and USA. Egypt, Chile, India, Australia, Spain, and Morocco were identified as key emerging opportunity markets, primarily driven by the size and scale of their hydrogen ambition, perceived likelihood of a gap in their domestic capabilities, and Scotland’s ability to capitalise on these opportunity areas through trade links and ease of doing business. These include:

• supply of subcomponents to in-market electrolyser manufacturing (Spain)
• supply of cross-cutting products, such as process and electrical equipment, across the supply chain (Spain)
• providing expertise and technology gained from its domestic renewables, oil, and gas sectors (Chile/Australia/India)
• providing project delivery experience for market supply chain projects (Egypt)
• sharing early knowledge and experience around infrastructure and transport (Spain/Chile)
• exporting storage vessels to market (Egypt)
• open to International Investment (Australia).

Whilst the data suggests that these markets will provide significant opportunities for Scotland’s supply chain, other key markets with significant clean hydrogen markets will also remain important, e.g. USA, EU countries and Japan. Given the early development and scale of those major markets, they will still provide opportunities across our supply chain due to other factors such as existing trading relationships, market familiarity, geographic proximity, etc.

We will determine in more detail the key aspects of the clean hydrogen value chain in which Scotland has a clear competitive advantage and will identify and support those supply chain companies that have the products and services with export potential.

Playing a role in the development of the hydrogen sector in international markets will require public and private sector partners to understand, engage with, and create a foothold in markets with high ambition. To enable this, our international hubs and Scottish Development International (SDI) will continue to prioritise engagement in markets offering the greatest opportunities for the export of Scottish supply chain goods and services, and we will support Scottish companies at home and abroad to seize these opportunities.

5.2 Company Engagement

There are a number of notable large companies already active in many clean hydrogen projects in overseas markets and a handful of SMEs with a track record or niche product/service offerings actively targeting international opportunities or already delivering exports. A significant proportion of the emerging hydrogen supply chain capability is from within the traditional energy company base seeking to diversify their business into wider energy transition areas.

As a result, many companies that could be selling into the hydrogen sector won’t necessarily identify as a hydrogen company because at this stage such opportunities may be considered a diversification opportunity for those currently selling into traditional oil & gas or other renewable energy markets. Improved understanding of the range of products and services required for hydrogen projects will enable more effective identification of market opportunities for those companies able to support the wider development of hydrogen beyond the the core technology.

Enterprise Agencies have been working hard to establish relationships with many key companies via events, webinars, and individual company meetings. These opportunities are being utilised to communicate with developers about supply chain opportunities related to their projects. These regular engagements continue to raise general awareness of the scale of opportunity on the horizon and offer links to project developers, other companies and stakeholders, investors, and funding. The number of Scottish supply chain companies with potential to sell into the hydrogen sector in overseas markets is expected to grow as the sector expands domestically and more companies with potential begin to diversify into this new aspect of the energy transition.