Hydrogen action plan

Introduction

Our world leading climate change targets to achieve net zero greenhouse gas emissions by 2045 and a 75% reduction by 2030 against the 1990 baseline, mean that across our economy we need to move at an unprecedented pace to deliver the innovation, investment, regulation and market environment that will enable the required step change towards net zero.

Hydrogen could be an important tool to help lower our greenhouse gas emissions and to minimise our impacts on the climate. The sixth Carbon Budget Report from the Climate Change Committee^[2] suggests that hydrogen production in the UK could scale up to 90 TWh by 2035 – equivalent to nearly a third of the size of the current power sector in the UK.

Hydrogen provides a sustainable alternative to burning fossil fuels and can be used to decarbonise many parts of our economy, including industry, transport, power and heat. In the transport sector, for example, hydrogen can provide the zero carbon energy-dense fuels that will help decarbonise key parts of the sector, such as some heavy road vehicles, parts of the rail network, marine vessels and aviation. Transported through the gas grid it could help decarbonise commercial premises and make a contribution to decarbonising home energy use. For energy-intensive industries, switching to hydrogen is considered one of the few viable options for significant decarbonisation in the next decade. An overview of some of the sectors where hydrogen might be more or less likely adopted as a route to decarbonisation based on current alternatives and available opportunities is presented in Part 2 of this Action Plan.

To have a thriving hydrogen economy, we need both domestic and international demand for hydrogen. Our ambition is for Scotland to become a leading producer and exporter of hydrogen and hydrogen derivatives for use in the UK and in Europe, with the first hydrogen delivered from Scotland to mainland Europe in the mid-2020s. The opportunity for Scotland within the developing global hydrogen market is significant. Increasing European demand for alternative energy sources, to reduce dependency on fossil fuels, means that the supply of renewable hydrogen will play a major role not just in the energy transition but in enabling security of supply across Europe through diversification of fuels and supply sources. The Hydrogen Action Plan supports the objectives within the National Strategy for Economic Transformation^[3] in respect of maximising new market opportunities. Indeed, the development of the hydrogen economy will help build on Scotland’s strengths to win an ever-greater share of domestic and international market opportunities.

In Scotland, aligning early hydrogen production coupled with market demand is imperative. Hydrogen for transport could be a big part of this, with demand being as high as 14.9 TWh a year by 2045 if affordable supply is in place.^[4] Hydrogen vehicles are already on the road in Scotland and this Action Plan sets out how we can build on this success. Alongside electricity and low carbon fuels, hydrogen and its derivatives such as ammonia and e-methanol have the potential to reduce transport emissions and create green jobs.

Hydrogen is anticipated to play a useful role in delivering large-scale and long-term energy storage in an integrated energy system and has the potential to replace or augment the critical balancing and resilience services that natural gas storage provides to the electricity system today. Hydrogen could play a wider role in our journey to a zero carbon electricity system both through the production of renewable hydrogen from our huge renewable resources when demand for power is low, as well as the potential for hydrogen-fuelled turbines to meet demand and provide valuable system services – replicating the function currently provided by fossil fuel-powered generation. Renewable hydrogen production offers the potential to help overcome electricity grid capacity issues and offset the need for bill payers to fund constraint payments. Also, exporting hydrogen to other parts of the UK and Europe provides a new revenue opportunity for renewable energy developers that may reduce or potentially eliminate reliance on Contracts for Difference.

We are taking a regional approach to our support for the development of the hydrogen economy in Scotland to recognise the variety of natural assets, skills and potential applications for hydrogen across different geographic areas of Scotland. Hydrogen will play a key role in decarbonising our industrial clusters, supporting the just transition of the workforce in high-carbon sectors in the northeast of Scotland and provide opportunities for our islands and rural communities to maximise the benefit of their vast access to renewable resources. A key focus is the development of Regional Hydrogen Energy Hubs, described in more detail in Part 2, that will help to deliver the benefits of hydrogen in each of these regions.

In line with our statutory obligations, a Strategic Environmental Assessment (SEA) has been carried out on this Hydrogen Action Plan. The assessment did not identify direct significant adverse effects but made recommendations on how minor adverse effects could be reduced or avoided, or potential benefits could be enhanced. A robust regulatory environment will be key to avoiding potential environmental impacts, including close regulation and monitoring of water abstraction, desalination of water and disposal of brine. To that end, we have formed a Scottish Regulatory Steering Group, comprised of key regulators, to provide advice on matters such as the environment and health and safety.

Further detail on how the recommended mitigation and enhancement actions will be considered during the implementation of the Action Plan, including in the development of the regulatory, planning and consenting framework, will be detailed in our SEA Post-Adoption Statement.

Hydrogen Policy Development and Delivery

Scottish Government Hydrogen Policy Context

2020

Scottish Hydrogen Assessment

Scottish Government Hydrogen Policy Statement

Draft Hydrogen Action Plan

2021

Climate Change Plan Update

National Strategy for Economic Transformation

2022

Hydrogen Investment Proposition

Hydrogen Action Plan

Our Hydrogen Policy Statement^[5] published in 2020 described the potential role hydrogen could play in Scotland to achieve net zero. The Scottish Government Hydrogen Policy Statement:

• confirmed support for the strategic growth of a hydrogen economy in Scotland;
• set out an ambition of 5 GW of renewable and low-carbon hydrogen production by 2030 and 25 GW by 2045;
• committed £100m funding towards the development of our hydrogen economy;
• confirmed that both renewable and low-carbon hydrogen will play an increasingly important role in our energy transition to net zero in 2045, with the need to see as much renewable hydrogen in the energy system as quickly as possible and support the establishment of low-carbon hydrogen production at scale in the 2020s linked to carbon capture and storage (CCS);
• set out how Scotland’s abundant natural resources, skills and supply chain offer the potential for large scale production of renewable hydrogen from offshore wind to be a key driver of the hydrogen economy in Scotland;
• confirmed support for the demonstration, development and deployment of hydrogen;
• committed to drive technological progress and advance innovation by unlocking public and private funds for innovation development, and support demonstration for key hydrogen technologies, such as fuel cells and electrolysers;
• recognised the need for pace – the need to start now and grow quickly to capitalise on opportunities within the domestic and global hydrogen market;
• committed to actively seek international collaboration in the development of our shared hydrogen economy and fully explore our hydrogen export potential;
• committed to support the transition and growth of Scotland’s existing supply chain, including in the development of skills and manufacturing capacity, that can play a significant role in the hydrogen economy both domestically and internationally;
• committed to exploring the opportunities for negative-carbon hydrogen, combining the potential to use bioenergy to produce hydrogen with CCS; and
• committed to engage with the UK Government on the development of a UK policy and regulatory framework for hydrogen, business models, market mechanisms, carbon pricing, feed in tariffs, fuel economy standards, renewable fuel standards and zero emission vehicle mandates – all of which are important for raising market certainty and investor confidence.

Our Hydrogen Action Plan sets out what the Scottish Government will do and how we will work with others to implement the strong strategic approach required to support the development of the hydrogen economy in Scotland. This will support our efforts to reduce greenhouse gas emissions from our energy system, primary and manufacturing industries, homes and transport, while ensuring a just transition.

The actions in this plan are designed to:

• drive Scotland’s hydrogen production capability to meet an ambition of 5 GW of renewable and low-carbon hydrogen by 2030 and 25 GW by 2045;
• address current barriers to the uptake of hydrogen including high production costs;
• support the growth of Regional Hydrogen Energy Hubs;
• encourage demand for hydrogen by supporting hydrogen use and developing our supply chain capability;
• support the realisation of the economic benefits of Scotland’s hydrogen export potential;
• secure broad economic benefit from public sector and private sector support for development of regional hydrogen production and use; and
• encourage the development of a strong hydrogen sector in Scotland that supports a just transition to net zero.

How much Hydrogen is 5GW?

Our 5GW ambition by 2030 is for installed production capacity of hydrogen which includes both renewable and low-carbon hydrogen.

For scale reference, Scotland’s total energy demand per annum is 161 TWh.

We can translate this to more than 17.5 TWh and over 450,000 tonnes of hydrogen.

5GW of hydrogen could produce energy equivalent to 15% of Scotland’s total energy demand.

The Hydrogen Economy Journey

Early 2020s

Hydrogen Policy Statement and draft Action Plan

ScotWind Leasing Round

Launch of the £10m Scottish Hydrogen Innovation Scheme

Scotland Hydrogen Investment Proposition

Net Zero Technology Centre Hydrogen Backbone Link project

Hydrogen Economy Cluster

Scottish Hydrogen Action Plan

Scottish Hydrogen Innovation Network (SHINE)

Scottish Green Hydrogen Fund launch

Establishment of Scottish Hydrogen Industry Forum

Scottish Hydrogen Export Plan

Mid 2020s

Scale-up of onshore renewable hydrogen production and supply chain

Scotland’s first Hydrogen Energy Hub operational in Aberdeen

H100 Fife 100% hydrogen gas network operational

Several Regional Hydrogen Hubs developing

Low-carbon hydrogen production projects developing

INTOG leasing round concludes and projects begin development

Increased solar generation capacity

First export of hydrogen from Scotland

5 GW of production in construction or operation

New onshore wind projects in construction (to meet 12 GW ambition)

MW scale hydrogen production from Wave and Tidal

GW scale hydrogen production from ScotWind

Hydrogen use in some transport modes, industrial use, derivatives and fuels

Increasing volumes of Scottish hydrogen exported to UK and Europe

Large-scale hydrogen storage and pipeline infrastructure