A new report by energy market analytics firm Aurora Energy Research has found that hydrogen can meet up to half of Great Britain’s final energy demand by 2050, providing an important pathway to reaching UK’s ambitious Net Zero targets.
According to the report, both blue hydrogen (produced from natural gas after reforming to remove carbon content) and green hydrogen (produced by using power to electrolyse water) are expected to play an important role, providing up to 480TWh of hydrogen, or around 45% of Great Britain’s final energy demand by 2050.
The scale of hydrogen demand across the economy is an important factor that will shape the relative share of blue and green hydrogen.
If deployment is limited to hard-to-electrify sectors, like steel and chemicals, supply from green hydrogen using low-carbon power can meet a significant part of the demand.
However, widespread adoption could mean the deployment of up to 14 million hydrogen boilers and more than 75% hydrogen penetration in heavy-goods vehicles.
This would necessitate the deployment of blue hydrogen technology using natural gas with carbon capture and storage (CCS) to provide the required scale of supply
The relative share of green and blue hydrogen will also depend on the availability of cheap power, the report says.
Deployment of green hydrogen will be driven by the amount of surplus low-carbon generation and cheap power available for electrolysis, which will depend on the policy direction and other developments in the power sector.
All Net Zero scenarios require substantial growth in low-carbon generation such as renewables and nuclear, and electrification upon which hydrogen benefits are complementary in challenging sectors.
Hydrogen could provide multiple benefits to the power sector, with increasing capture price and revenues for clean power generators by circa £3bn per year by 2050, and a reduction in the power sector requirement for flexibility during peak winter months.
Falling technology costs and gas prices will drive steady reduction in the market hydrogen price, which is expected to go below £50/MWh of hydrogen by 2050.
Hydrogen storage in salt caverns can provide security of hydrogen supply in most years, but additional strategic reserve capacity of up to 7GW will be required to ensure system adequacy during extended scarcity periods.
All Net Zero scenarios require intensive policy development and investment across all energy sectors, which amounts to over £450bn in net present value terms.
No pathway (high hydrogen or electrification) is decisively better in terms of total system cost.
Generally, hydrogen scenarios require additional investments on hydrogen transmission and distribution infrastructure and present higher energy costs, but lower spending on low-carbon power subsidies, power network costs and power capacity market spending.
However, the implication of the report is that a hydrogen pathway could boost UK’s industrial competitiveness, with economic benefits in areas where there are fewer economic opportunities.
Specifically, it would enable the development of globally competitive low-carbon industrial clusters, particularly around Humber and Teeside.
It will also utilise UK’s comparative advantage on blue hydrogen and CCS due to the availability of usable carbon storage, which could make the UK a leader in terms of hydrogen production costs until merchant green hydrogen becomes competitive in 15-20 years.
Finally, the report identifies multiple policy options for policy to anticipate challenges and tackle key uncertainties in the short term, including setting decarbonisation targets and promoting hydrogen demand in key sectors, deploying CCS in strategic locations and advancing energy efficiency and network standardisation efforts.
In the medium and long term, policy focus would need to shift to harmonising markets and accelerating cost reductions.
Read the report in full here.