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

6. Critical Enablers

The following Critical Success Factors Framework provides a clear path for the growth of the hydrogen sector in Scotland. It identifies the critical success factors and the critical enablers that will need to be considered and delivered over the coming decades. This phased and structured approach should give confidence to domestic off-takers and prospective importers, as key milestones and projects are delivered, that we can deliver on our hydrogen ambition. Moreover, that Scotland can be seen as both a credible producer of hydrogen and hydrogen products for export as well as home to a world-class hydrogen supply chain with capabilities that can be applied internationally.

Figure 9: Hydrogen Export Critical Success Factor Framework

CSF Framework – Assess & Test

Infographic text below:

Assess:

Hydrogen Supply

Understand the relationship between domestic usage of H2 and economic export opportunities

Consider domestic supply projects and relationship with demand

Recognise developers’ needs and their requirements on regulation to support project viability

Assess impact of the structure and costs of the electricity market in Scotland to H2 projects

Connect

Assess the dynamic nature of H2 sector in Scotland, through an adaptable and agile approach

Identify key storage & transport infrastructure requirements to facilitate export growth

Ensure emerging Certification and Regulation supports future Scottish H2 exports

Assess green electricity requirements to ensure H2 exports are a commercially viable proposition

Hydrogen Demand

Identify and develop international H2 export opportunities for Scotland

Identify specific market demand for different H2 products

Develop robust international networks for H2 transportation in potentially a range of carriers

International Competitive Advantage

Demonstrable alignment with UKG policies and levers to facilitate growth in Scotland’s H2 export capacity

Demonstrate the international strengths of the Scottish H2 supply chain

Have clear plans to transition our workforce into the H2 sector

Enhancing the H2 export capabilities of Scottish companies

Timeline

2024-2026

Critical Enablers

Innovation

Skilled Workforce

Investment

Cost Competitiveness

Test:

Hydrogen Supply

Develop key projects across multiple H2 products

Inform and influence international

H2 production and transportation plans

Plan to meet key infrastructure requirements from customers

Connect

Co-ordinate support and focused on H2 projects with the greatest export potential

Create alignment on funding and regulation with UKG to help develop EU/International Markets

Hydrogen Demand

Scotland’s H2 and Hs products meet international standards and regulations and are certified by appropriate certification schemes

Scottish H2 and H2 products imported & used in international markets

International Competitive Advantage

Enterprise Agencies track emerging projects to promote Scotland’s export capacity

Pilot projects demonstrate Scotland’s export capabilities

Scotland’s successful initial H2 exports create international confidence

Timeline

2027-2029

Critical Enablers

Innovation

Skilled Workforce

Investment

Cost Competitiveness

CSF Framework – Export & Scale

Infographic text below:

Export:

Hydrogen Supply

Projects demonstrate necessary production, regulation & transport assurance

Successful delivery demonstrates Scottish credibility for exports

Connect

Transport vectors in place for identified H2 and H2 products

Ports and storage facilities in place with expansion plans to meet future growth

Hydrogen Demand

Successful fulfillment of export contracts at cost and on time

Demonstration of Scotland ability to deliver internationally

Establish and grow emerging international H2 market demands

International Competitive Advantage

Scottish H2 exports delivered reliably

Market demands increase for Scottish H2 and H2 Product exports

Seen as a credible supplier with growth planned to meet market growth demands

Timeline

2030-2035

Critical Enablers

Innovation

Skilled Workforce

Investment

Cost Competitiveness

Scale:

Hydrogen Supply

Secure significant parts of the target international markets and expand exports

Connect

Expanded critical export infrastructure in place to accommodate increased volumes of H2 trade

Domestic production expands to create capacity to meet international demand

Hydrogen Demand

Expand Scottish H2 exports into new & emerging markets as the global transition to H2 accelerates

International Competitive Advantage

Maximise economic benefits for Scotland from the export potential of H2 across international markets

Timeline

From 2035 onwards

Critical Enablers

Innovation

Skilled Workforce

Investment

Cost Competitivenes

6.1 Innovation

The Scottish Government continues to recognise the importance of hydrogen research, development, and innovation projects to help better align investment opportunities within our economic priorities.

The current research into hydrogen production, storage, distribution, and end user technologies will be crucial as we look to expand the scale of renewable hydrogen projects over the coming years.

6.1.1 SHINe

Launched in May 2024, the Scottish Hydrogen Innovation Network^[33] (SHINe) is funded by Scottish Enterprise to enhance the hydrogen landscape in Scotland and accelerate hydrogen innovation. It will run until 2026 and bring together Scotland’s hydrogen innovation ecosystem, providing a single front door for innovative companies from Scotland and elsewhere seeking hydrogen expertise, demonstration opportunities, testing facilities, and partnerships. Initial engagement is beginning with several hydrogen innovation companies, and this work will allow new and emerging companies to become part of the supply chain for hydrogen and stimulate the innovation needed for the sector to evolve.

6.2 Skilled Workforce

Consultation with industry has emphasised the critical need to expand and transition Scotland’s workforce to strengthen and support the future hydrogen economy. The Hydrogen Action Plan^[34] highlights the importance of this work and commits to working with industry and partners to establish the skills required to underpin our energy transition.

Our recently published Green Industrial Strategy also emphasises the need to collaborate with industry and partners to develop the necessary skills for supporting the energy transition.

Together with our Enterprise Agencies, we will continue to work across the ecosystem to ensure Scotland has a strong environment for growth to maximise export potential.

6.3 Investment

To achieve our ambitions for economic growth through building a new hydrogen sector, we must cultivate a thriving green industrial ecosystem for investment. Public bodies, businesses, investors, local government, communities, regional partnerships, and others have essential roles and responsibilities in the investments required to build a green economy which supports innovation, investment, and growth. In return, there are rewards to be won in the form of profitable businesses providing high-value jobs across our communities; a low-emissions society; and a productive economy to support excellent public services.

6.3.1 Strategic Investment

We will work across government and with industry to ensure that investment for the development of wider renewable infrastructure considers the alignment and future integration of hydrogen infrastructure where possible.

In addition, we will continue to work with the UK Government, making the case for and urging it to support infrastructure development for the offshore transportation of green hydrogen from Scotland’s ports and harbours.

It is important that the supporting market and regulatory frameworks, as well as strategic planning to guide the roll-out of hydrogen transport and storage infrastructure, consider the onshore and offshore transportation of hydrogen in parallel, particularly in consideration of pipelines.

6.3.2 Inward Investment

Our Shaping Scotland’s Economy: Inward Investment Plan (IIP)^[35], published in October 2020, outlined a plan for Scotland to be a leading destination for inward investment aligned with Scotland’s values of fair work, net zero, and inclusive prosperity.

The IIP highlights the important role inward investment can play in Scotland’s economic growth by delivering high-value jobs to the economy.

Scotland already has a successful track record of attracting inward investment. Our strong workforce, competitive cost base, world-class universities, supportive business environment, natural resources, and high quality of life are what makes global companies decide to locate here.

Accordingly, Scotland has many of the supporting conditions to help attract the new inward investments, in both the production of hydrogen and in supply chain, which will be needed to grow and support a successful new hydrogen sector.

6.3.3 Capital Investment/Scottish National Investment Bank

The Scottish Government’s Global Capital Investment Plan^[36] sets out how we will enhance Scotland’s position on the international stage as a dynamic and innovative nation with an outward facing economy.

The Scottish Government recognises that the role of private sector investment is critical in achieving pace and scale – whether directly into businesses and projects in Scotland, through partnership with public sector investment, or through public sector borrowing on capital markets.

The Capital Investment Plan is central to securing the significant investments needed to grow the Scottish hydrogen sector. Key actions identified in the plan, such as building an investor-ready pipeline of investable projects and opportunities, establishing the appropriate regulations and incentives to support investment, and mobilising our global networks, as well as the work of the Scottish National Investment Bank^[37], are vital components to ensure a successful hydrogen sector in Scotland.

6.4 Cost Competitiveness

To compete effectively with other international regions, Scotland must produce cost-competitive green hydrogen. Developing a pipeline between the UK and Northern Europe would be critical to help facilitate the export of this hydrogen. Research has been commissioned by Scottish Futures Trust to look at the economic case for the development of a hydrogen pipeline and the impact that this would have on our ability to produce and export cost effective green hydrogen to key markets, and this will be published shortly.

Furthermore, to secure Scotland’s share of the hydrogen demand market, the domestic sector needs clarity on required hydrogen products, quantities, timelines and costs. We will continue to make the case for the UK Government to expand the Hydrogen Business Models to include export support.