2023: hydrogen’s year of delivery

2022 was an extraordinary year for hydrogen as Russia’s invasion of Ukraine accelerated the search for fossil fuel alternatives, particularly in Europe where dependency on Russian natural gas was the greatest.

Politicians got behind hydrogen with initiatives including the Hydrogen Business Model in the UK, REPowerEU on the continent and the U.S. Inflation Reduction Act, all of which provide policy and financial support aimed at lowering the cost of clean hydrogen production and boosting innovation.

Companies ramped up their climate commitments too with many embracing hydrogen as central to their net-zero targets. Sectors from heavy industry to manufacturing, shipping, aviation and energy are realising that clean hydrogen is, in many cases, the only option for decarbonisation.

Clean hydrogen can be made from splitting water with electrolysers powered by renewable energy, whereas producing hydrogen using natural gas emits carbon dioxide which is then captured, and means the hydrogen is classed as blue.

The expectation of surging demand has been a catalyst for new supply of hydrogen and Europe is leading the way. There is an 1,100 MW pipeline of planned or announced electrolytic hydrogen projects in Europe for 2023 compared with less than 100 MW in the U.S., according to research from investment bank ING and BloombergNEF.

Clean hydrogen can be made from splitting water with electrolysers powered by renewable energy.

However, the U.S. is expected to catch up rapidly in 2023. The U.S. Inflation Reduction Act offers the most generous subsidies in the world for clean hydrogen production (as much as $3 per kg depending on how clean it is) and is predicted to attract significant investment to hydrogen projects on the other side of the Atlantic.

There have been calls for Europe to respond to the lure of U.S. subsidies, but the UK’s Hydrogen Business Model is already up and running with the first round of submissions while the U.S. system has yet to unveil the details of how it will be implemented. We are looking forward to a shortlist of successful projects being announced in early 2023 for the first allocation of the UK Hydrogen Business Model.

Financial support is not the only thing that governments can provide. Producers also need to know they have a market for their output, and the EU’s €3 billion European Hydrogen Bank, which aims to be a market maker in the supply and demand of hydrogen looks like a potentially good model to bring that about.

A number of landmark hydrogen projects were announced in the UK in 2022, including the two government-backed low carbon clusters based around the industrial centres of the northeast and northwest of England, East Coast Cluster and Hynet, respectively. Ryze Hydrogen announced an agreement with Centrica to build and operate a series of hydrogen production facilities across the UK to supply industry and transportation.

Time is of the essence. The longer it takes to start cutting emissions, the more will need to be cut and the slimmer the chances of limiting global warming to 1.5 degrees above pre-industrial levels.

After a year of so many announcements, the UK (and global) hydrogen industry needs to start delivering. Of course, large industrial projects are not built overnight. Consultations need to be launched, permits attained and finance raised. However, bigger projects will soon be making progress in 2023 as smaller projects start producing.

Time is of the essence for two important reasons. The first is the science of climate change. The longer it takes to start cutting emissions, the more will need to be cut and the slimmer the chances of limiting global warming to 1.5 degrees above pre-industrial levels.

The cost of producing hydrogen needs to come down fast enough and volumes need to ramp up quickly enough to bring significant decarbonisation to steel production, agriculture and transport over the coming decade that the task of achieving net zero by 2050 is achievable.

As we saw in the northern hemisphere in 2022, the effects of climate change are already with us. Every year we delay our response and continue to release planet warming gases like carbon dioxide into the atmosphere, the more we will have to spend on efforts to mitigate the impacts of a hotter, drier planet in the future.

Secondly, policy makers need to deepen their understanding of hydrogen for it to prove its worth and break into vital sectors, such as heating.

The UK needs both hydrogen boilers and heat pumps to decarbonise domestic heating, because the latter are not appropriate for many of the nation’s homes, either because they are not adequately insulated or not big enough to contain a water tank.

Important trials are taking place to demonstrate hydrogen’s role in domestic heating, cooking and hot water. 300 homes in Fife, Scotland, are preparing to become the world’s first to use 100% hydrogen from 2024. Two larger villages – Ellesmere Port and Redcar – are currently competing to expand the trial to 2,000 homes and businesses from 2025, with a decision from Ofgem due this year.

The UK needs both hydrogen boilers and heat pumps to decarbonise domestic heating, because the latter are not appropriate for many of the nation’s homes, either because they are not adequately insulated or not big enough to contain a water tank.

It is crucial that such trials move forward in 2023 in time for a government decision on the role of hydrogen in these settings by 2026. Successful trials would unlock billions of pounds of investment in vital hydrogen infrastructure.

Similarly, the infrastructure to support the growing number of hydrogen buses and trucks on our roads needs to keep pace with the demand from vehicles.

As we welcome the many exciting new project announcements set to arrive in 2023, we are also looking forward to seeing finance secured and shovels in the ground on the many projects that are currently in planning.

Here at HYCAP we’re off to a busy start and will be proudly exhibiting in the UK Pavilion at Abu Dhabi Sustainability Week from 14 – 19 January 2023 attended by heads of state, policy makers, industry leaders, investors and entrepreneurs, and we very much hope to see you there.

A happy hydrogen new year to you all.

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