Hydrogen action plan

Part 1 – A Unique Opportunity for Scotland

1.1 Scotland’s hydrogen potential

Scotland’s unique selling point is the combination of its natural resources, infrastructure and skilled energy workforce, which could enable it to become a low-cost producer of hydrogen in Europe. Scotland has an abundance of wind, both onshore and offshore, tides, and reliable water resources with which to support electrolysis. We also have a highly experienced oil and gas sector that is pivoting towards the deployment of hydrogen technology as part of the energy transition.

Our ambition for hydrogen production is closely aligned with our expanding capacity ambitions for both offshore and onshore wind. The Scottish Offshore Wind to Green Hydrogen Opportunity Assessment,^[6] which was published alongside the Scottish Hydrogen Assessment report,^[7] sets out Scotland’s renewable hydrogen production potential as 25 GW by 2045, dependent on market conditions. The rate of growth of renewable hydrogen production in Scotland will be influenced by several factors, including market demand and the cost of renewable hydrogen produced in Scotland. However, it is Scotland’s vast opportunity for renewable generation that sets it apart from other parts of the UK and Europe and provides the potential to produce industrial-scale renewable hydrogen this decade and for decades to come.

1.2 Onshore wind

Scotland has excellent onshore wind expertise and is recognised as having one of the best wind regimes anywhere in the world in which to deploy projects. Development of renewable energy presents an immense opportunity for Scotland to lead by example – showing how a clean energy future is possible at home, and as a net exporter of renewable energy, attracting further investment and ensuring our progress to net zero is environmentally and economically beneficial.

The draft Onshore Wind Policy Statement^[8], published on 28 October 2021, sets out our ambitions for onshore wind in Scotland out to 2030. It highlights the huge potential for this technology, assesses the significant economic opportunity of future deployment, particularly with regards to green recovery aspirations, and outlines an ambition to deploy a further 8-12 GW of installed onshore and island wind by 2030. A significant portion of this generation capacity may not be able to connect to the grid so hydrogen production could be a very attractive enabler. The final Onshore Wind Policy Statement will be published shortly.

A strong onshore wind sector will support the development of a range of small to large-scale renewable hydrogen projects.^[9] In the South of Scotland alone, there are already 28 projects consented and awaiting construction or under construction to a total of 1 GW to add to 1.45 GW (2021) installed capacity and a further 1.6 GW in planning. As these hydrogen production projects come online, they will aim to improve energy system efficiency by addressing renewable intermittency, which will enable production at times of excess electricity supply.

In the immediate term, the Scottish Government will focus activity and investment to accelerate renewable hydrogen production from onshore wind developments that are constrained or awaiting grid connection. This will thereby help to establish supply chain capability, secure domestic demand and lay the foundational hydrogen infrastructure ahead of the anticipated gigawatt-scale hydrogen production associated with offshore wind towards the end of this decade.

1.3 Offshore wind

Scotland benefits from a large maritime zone and substantial wind resource across the region. This makes it a key provider of offshore wind, not only to deliver its own net zero targets but also to help achieve net zero goals for the UK and, potentially, Northern Europe. Within Scottish waters, there are currently just under 2 GW of operational offshore wind projects and a further 3.82 GW of projects consented or under construction.^[10] There are also 4.2 GW of projects with lease options ahead of ScotWind leasing results.

The outcome of the ScotWind offshore wind leasing round was announced in early 2022. A total of 20 projects, with a combined capacity of 27.6 GW, secured lease options.^[11] These are expected to generate billions of pounds of investment in Scotland’s economy over the next 20 years. Many of the successful applicants for ScotWind leases are considering hydrogen production as part of their plans.

A planning round for innovation and targeted oil and gas decarbonisation (INTOG) opened on 24 August 2022, with the specific purpose of facilitating offshore wind development to decarbonise oil and gas infrastructure operations and contribute towards net zero.

Some INTOG projects may have excess capacity beyond powering oil and gas platforms. Where possible, conversion to hydrogen as a form of storage for later use or transfer to another user offers a way to capitalise on that excess and provides potential further opportunities for the Scottish economy through the hydrogen supply chain. These will support the ambition outlined in our Hydrogen Policy Statement of generating 5 GW of hydrogen by 2030. INTOG exclusivity awards will be announced in early 2023.

INTOG will potentially enable the delivery of up to a further 5.7 GW of new offshore wind projects targeting oil and gas decarbonisation, with a further potential 0.5 GW to test new technologies or solutions including hydrogen production in Scottish waters.

1.4 Just Transition

We are committed to a just transition to net zero, which means working with people, businesses and communities across Scotland to ensure they have a clear role in decision-making, that they can access support and advice, that costs to users are kept as low as possible and that the benefits of the transition are spread fairly.

The growth of a strong hydrogen sector offers significant opportunities for regional and local economic benefit, creating new high-quality green jobs in our rural communities, islands and cities, and new opportunities for those currently working in high-carbon sectors. Our analysis, based on a broad range of production scenarios, indicates that a strong hydrogen sector in Scotland could support up to 300,000 new or secured jobs across all skill levels by 2045.^[12] Many of the skills required already exist in various sectors, including our renewable and offshore industries.

As is outlined in this document, we will work with key partners to provide targeted support to develop skills programmes and to help people, companies, and communities to connect to the opportunities created by the growing hydrogen economy. This includes a commitment to support those with relevant skills in high-carbon sectors to transition to new green jobs, as well as support for the development of new skills. We will set out more detail on our approach to supporting a just transition in the Energy Strategy and Just Transition Plan in 2023, which considers hydrogen as part of a whole-system approach to the just transition and will be supported by our energy evidence base.

1.5 CCUS

Achieving the deep decarbonisation of industrial energy and industrial heat demand will require large volumes of renewable and low-carbon hydrogen and other decarbonisation solutions to be produced and deployed. We are determined to ensure the strategy for deployment of these technologies will enable decarbonisation at pace and cannot be used to justify unsustainable levels of fossil fuel extraction or impede Scotland’s just transition to net zero. Low-carbon hydrogen production should also achieve the highest technically possible emissions capture rates.

The deep decarbonisation of our industrial and electricity sectors will require the timely development of carbon capture, utilisation and storage (CCUS), in parallel with the development of hydrogen technologies. These underpin our route to net zero and support a secure and resilient energy system, while supporting employment for those currently working within our industrial sector and highlighting the importance of a just transition.

This is particularly evident in industrial clusters such as Grangemouth. Six out of seven of the largest industrial emitters, as well as a multitude of smaller sites, are located within 50km of Grangemouth.^[13] All credible pathways to net zero will rely to some extent on the decarbonisation of this cluster. Many processes at Grangemouth are high temperature processes or processes that involve the transformation of chemicals. The options available to decarbonise these processes are extremely limited, which is why hydrogen combined with CCUS has been selected as one of the most promising solutions to help decarbonise this cluster. Indeed, this is the preferred pathway for many industrial clusters across the UK and globally.

CCUS will establish the opportunities to decarbonise industry and pave the way for establishing the transportation and storage infrastructure to support the growing hydrogen economy in Scotland. CCUS also enables negative emissions technologies in the bioenergy sector and for capturing emissions directly from the air through direct air capture (DAC) plants. Notably, direct air capture technology combined with an anaerobic digestion plant is currently being demonstrated at Crofthead in Dumfries and Galloway, operated by Carbon Capture Scotland.

The Scottish CCUS Cluster encompasses industrial, power, low-carbon hydrogen production and DAC projects, and the CO₂ transport network required for permanent storage of captured emissions. The Scottish Cluster has been awarded the status of ‘reserve cluster’ in Track-1 of the UK Government’s cluster-sequencing process. We are committed to supporting the continued growth and development of the Scottish Cluster to ensure that Scotland reaches its net zero goals by 2045.