It doesn’t take a genius to work out that as demand for fossil fuel reduces, demand for a replacement form of energy will increase. It does however need more than one genius to produce solutions to implement and then sustain a green energy policy and strategy, which is why the Scottish Government need to listen to industry experts including scientists and engineers.
The good news is that this expertise is available on their doorstep. Scotland is renowned for its scientific and engineering expertise which has been further enhanced due to skills training and knowledge built up over decades of oil and gas exploration in the North Sea. Taking action based on that insight, though, may not be as straightforward for the Scottish Government as things may first appear. As energy is reserved to the UK government, its important to understand the UK’s hydrogen strategy.
UK hydrogen policy
The UK Government currently holds the levers of power on the energy front since policy decisions are reserved to Westminster. The latest policy initiative, “Project Union“, seeks to connect hydrogen production, storage and demand to enable the UK to achieve net zero and empower a UK-wide hydrogen economy.
In April, the UK Government doubled its hydrogen target to 10GW. However, rather than making a clean break, this particular target includes blue hydrogen, which is derived from fossil fuels. This project will also ensure that the rest of the UK will be serviced using Scotland’s natural assets in the immediate future.
The future of hydrogen deployment is reliant on the UK government’s commitment to climate change. This commitment has been called into question in a recent report by the government’s own Climate Change Committee (CCC). In the report CCC chair Lord Deben Chair urges the government to put climate change “at the heart of its leadership”.
The report identifies that more investment is needed, and policy development needs to be ramped up. It would appear that the CCC has real concerns about the lack of progress by the UK Government towards the achievement of their own target of net zero. The ‘net zero target’ is UK government commitment to ensure the UK reduces its greenhouse gas emissions by 100% from 1990 levels by 2050.
Continuing with oil and gas extraction, licensing new fields and the opening of a coal mine in Cumbria have laid bare the lack of commitment by the UK government to the key pledges they made at COP26. The coal mine will emit 9 million tons of greenhouse gases annually. The Government’s justification for reopening the mine is that coal is needed for UK steel production. Critics, however, have countered the government’s argument stating that the use of coal in steel making is in decline as the industry moves towards more use of hydrogen.
The CCC report also highlights that key components of the UK’s Net Zero Strategy such as increasing hydrogen storage have long lead times and there are considerable delays in the implementation of other vital carbon reduction projects.
The UK Government’s lack of commitment has impacted on Scotland and unfortunately will continue to do so. Lack of investment in carbon abatement in the energy sector is holding Scotland back from meeting the targets set by the Scottish Government. The vice like grip on energy policy which the UK Government has, will hinder progress on Scotland’s climate change initiatives but it hasn’t stopped the Scottish Government doing what it can.
Is Scotland being left behind on the hydrogen front?
The Scottish Government has set a target to have 5GW of hydrogen-producing capacity by 2030. That’s a good start however, when this target is considered in context it appears low. One single project for the production of green hydrogen from wind power, based in Kintore, Aberdeenshire, is set to deliver 3GW of power using green hydrogen by 2030. The Statera facility will be one of the largest green hydrogen generation plants of its kind in Europe on completion. There are other green hydrogen projects planned for Fife, Shetlands, Glasgow and the Western Isles using wind & tidal resources.
Has hydrogen potential unwittingly been put on the back burner by policy makers, who are inclined to give more support to the fossil fuel lobby? We need to consider about how an independent Scotland, with the levers of power to drive energy policy can adopt a proactive approach to the development of hydrogen and establish the platform and components needed to prepare our energy industries to adapt and thrive.
Although the targets being set are not ambitious enough, Scotland is not being left behind. It is in fact off to a good start being the first country in the UK to publish a Hydrogen Policy Statement in 2020.
Scotland’s potential to lead the way
Countries with significant renewable resources like Scotland are in an excellent position to produce hydrogen, in the first instance for use in transport and industrial processes. Secondly, development of a hydrogen production industry presents opportunities to export the surplus and further develop the technology that can replace fossil fuel in cars (preferably hybrid) and boilers in homes.
The preferred route for Scotland should be green hydrogen which is produced by an electrolyser, which can be powered by renewable energy such as wind farms, or solar and tidal arrays. Water vapour is the only by-product of this process. The alternative blue hydrogen is produced by an electrolysis process powered by gas. With gas prices forecast to remain high across Europe, it makes more sense to bypass blue hydrogen production and immediately transition to green hydrogen production which uses renewables – it will be cheaper to produce in the longer term. Not a recommendation that the oil and gas sector would welcome but a necessary step to realise net zero targets.
It should also be highlighted at this juncture that Scotland is in sore need of an electrolyser manufacturer for green hydrogen production. In this regard, we are being outpaced by our Nordic neighbours and other EU countries such as Germany. Why not Scotland? An independent Scotland with the power over industrial policy could help build capacity in this manufacturing sector.
There are four hydrogen electrolyser technologies available at the moment, the cheapest and most mature is alkaline. The other technologies, involving rare components such as platinum and iridium, have some way to go to catch up. Since the process of electrolysis to produce green hydrogen involves renewable energy, electricity prices have to be factored into the cost of production. Obviously, locating production close to renewable sources which are plentiful, such as there are in Scotland, facilitates production and lowers the cost. Scotland has great potential to produce competitively priced green hydrogen without the need to be as heavily subsidised as other countries with less access to renewable energy sources.
The potential for a significant market share
The global Green Hydrogen Market is valued at USD 3.5bn in 2022 and is projected to reach a value of USD 36.5bn by 2030. The market grew at a compound annual growth rate of 39.8% between 2023 and 2030. Scotland has the potential to take a share of that market.
In addition to the export revenue potential, which can be achieved once domestic needs are met, the job creation and resultant boost to Scotland’s economy will be extremely beneficial in supporting a much-coveted goal of the Scottish Government and indeed the Scottish people: that of creating a thriving economy. The Scottish Government believes that establishing a hydrogen export market, the hydrogen industry and its supply chain could support 300,000 jobs by 2045.
A major advantage to Scotland is our wealth of existing oil and gas assets. Existing infrastructure can in most instances be repurposed to produce and deliver renewable energy, whilst at the same time addressing the challenges of climate change.
Perhaps though the biggest asset Scotland has in pursuit of net zero targets and sustainable energy sources is its current oil and gas workforce, whose skills are transferable and can become the trained and potential trainers of future renewables workers.
Potential for switching from blue to green hydrogen
The potential to replace existing uses of fossil-based hydrogen in industrial processes, should not be overlooked in the rush to fuel cars and provide energy in homes. Hydrogen can also be key, for example in reducing reliance on fossil fuels in high-temperature processes.
In Scotland, an industry that uses this type of process which contributed £6.2bn to the Scottish economy in 2022, is whisky, an industry that is thriving with exports up 37% by value, despite the difficult economic climate. (99% of whisky produced in Scotland is exported).
The annual theoretical potential hydrogen demand for all distilleries in Scotland was estimated to be 1.4 TWh. After fossil fuel refining and the chemical/pharmaceutical sector, distilleries were identified as the third largest potential demand source for hydrogen in the industrial sector.
Distilleries making the switch to Hydrogen
In distilleries heat energy is the predominant energy requirement and large amounts are needed to warm stills. Most rely on fossil fuels to do this. It’s no surprise that the biggest share of distillery emissions comes from the distillation process – 36% for column stills and 40% for pots.
A study in 2018 showed that the whisky industry was responsible for 528,792 tonnes of carbon emissions. It’s an industry that was ripe for change.
In recent years there’s been increased investment in alternative sources of energy. Pioneering the use of green hydrogen is Arbikie Distillery in Montrose where a wind turbine has been installed to provide renewable energy which will split water in an electrolyser to produce green hydrogen, powering the distillery via a hydrogen compatible boiler.
Early adoption of hydrogen in established high temperature industries such as distilleries may well be a prerequisite to opening up opportunities to other high temperature industry such as fertiliser manufacture, which is non-existent in Scotland at the moment.
Will green hydrogen mean cheaper fuel bills?
This is the question uppermost in most people’s minds as the cost of living crisis continues. Paying for the energy required to heat homes and cook meals has been a challenge for the majority and even harder for those on fixed and low incomes.
Green hydrogen production costs currently around €3-8/kg are expected to drop by 50% by 2030 and reduce steadily thereafter by 2050. Costs in countries where renewables are scarce are expected to be around €2/kg and where renewables are plentiful around €1/kg by 2050.
There is every possibility that Scotland with it abundance of renewable resources, will be well placed to supply green hydrogen at low cost to domestic and industrial consumers alike.
Lower renewable energy generation costs will ultimately lead to lower subsidies paid to fossil fuel industries, which in turn could lead to the UK Government (a currency issuer) spending on hydrogen power projects. Fossil fuel industries will of course lobby hard to avoid the removal of subsidies, but they are increasingly realising, by adopting their own green strategies that transition to renewables is inevitable and to survive they will have to adapt or die.
Attractive renewable energy prices will not only reduce fossil fuel subsidies but will also help to deliver cost effective end- user energy tariffs. Help to a broken energy market could be at hand.
Making the switch to renewable hydrogen for industry, particularly high temperature industrial applications, will also reduce natural gas consumption and make more available for export. To achieve this change, significant investments in electrical and hydrogen infrastructure will be needed. Although the manufacture of electrolysers is challenging it can be done and alongside suitable delivery methods and storage facilities, is essential if Scotland is to harness its green hydrogen production potential.
With large scale hydrogen projects already established or underway, be in no doubt that Scotland’s future can be green and it must be if net zero targets are to be realised by 2045.