Scottish Government Hydrogen Policy Statement

Executive Summary

Achieving Net Zero

It is becoming increasingly clear that hydrogen will play a major role globally in the transition to net zero, and Scotland's assets, natural, human and physical mean we can be a major player in this emerging global hydrogen market.

The International Energy Agency confirms clean hydrogen is currently enjoying unprecedented political and business momentum, with the number of policies and projects around the world expanding rapidly.

The European Union^[1] published their hydrogen strategy in June 2020 with a strategic objective to install at least 6GW of renewable hydrogen electrolysers producing up to 1 million tonnes of green hydrogen in the EU by 2024 and 40GW producing up to 10 million tonnes of green hydrogen by 2030. In 2020 Germany committed €9bn to their hydrogen strategy and France committed €7bn.

The UK Government will publish their Hydrogen Strategy in 2021 and have set a target of 5GW of low-carbon hydrogen by 2030.

Our world-leading targets for net zero emissions by 2045 will mean that our whole energy system will need to rapidly transform to meet the changing needs of consumers and society.

Combinations of demand reduction, energy efficiency and increasing uptake of electrification can take Scotland a good deal of the way towards our net zero future and the decarbonisation of our whole energy system. But reducing our demand for energy and electrification alone, are unlikely to be enough.

We believe that producing clean hydrogen and showing that it can be used to meet challenging energy demands (e.g. for heat, transport and Industry) will also be part of the next stage of the Scotland energy transition pathway.

During 2020 we have carried out a hydrogen assessment and a range of other analysis to deepen the evidence base in order to inform our policies on hydrogen going forward. From our assessment, it is clear that hydrogen is not just an energy and emissions reduction opportunity; it could also have an important role in generating new economic opportunities in Scotland.

We are currently experiencing a period of economic turmoil with jobs and sectors at risk from the impacts of the coronavirus pandemic. The development of the hydrogen economy and supply chain will play an important role in our energy transition to net zero and are key components of the green economic recovery. The economic potential of hydrogen is explored throughout this document.

This policy statement is aligned to the Scottish Government's Climate Change Plan which sets out our long-term vision for Scotland to end our contribution to climate change by 2045. Our climate targets are underpinned by our commitment to a just transition, that supports sustainable economic growth and jobs.

Hydrogen development and deployment is a dynamic issue. Therefore, this policy statement should be regarded as a responsive document which will be regularly reviewed and refreshed by the Scottish Government as we continue to identify the challenges and opportunities for the full development of renewable and low-carbon hydrogen in Scotland.

Drawing on the evidence, we will set out policy positions on where things stand now; and the ways in which hydrogen can help to achieve a clean, secure and affordable energy future.

We will describe our next steps in our hydrogen journey and set out how we will implement our hydrogen policies when we publish our Hydrogen Action Plan in 2021 which will be supported by £100 million investment to support its delivery over the next five years.

In the Hydrogen Action Plan we will set out details of how we will take forward the necessary actions to implement the policy positions in this document. We will continue to engage those with an interest in establishing a hydrogen economy in Scotland and seek views on how best to deliver these policies through our Hydrogen Action Plan. The draft Hydrogen Action Plan will be subject to the necessary statutory and other impact assessments.

We recognise that we cannot achieve our hydrogen ambitions alone. Many of the regulatory and legislative levers required are determined at a UK level. We, therefore, require the UK Government work with us in building a flourishing hydrogen economy.

In this policy statement we:

• Confirm Scottish Government support for the strategic growth of a strong hydrogen economy in Scotland, focusing our efforts on supporting the development of Scotland's hydrogen production capability to meet an ambition of at least 5GW of renewable and low-carbon hydrogen by 2030 and at least 25GW by 2045.
• Commit £100 million funding towards the development of our hydrogen economy over the next five years as implemented through our Hydrogen Action Plan, due for publication in 2021.
• Confirm that both renewable and low-carbon hydrogen will play an increasingly important role in our energy transition to net zero in 2045 and the importance of establishing low-carbon hydrogen production at scale by the mid-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 longer term hydrogen economy in Scotland.
• Support the demonstration, development and deployment of hydrogen and its emergent role in the sustainable decarbonisation of critical industry functions and processes, transport and heat in buildings.
• Commit 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.
• Recognise the need for pace – the need to start now and grow quickly to capitalise on opportunities within the domestic and global hydrogen market.
• Commit to actively seek international collaboration in the development of our shared hydrogen economy and fully explore our hydrogen export potential.
• 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.
• Commit to exploring the opportunities for negative carbon hydrogen, combining the potential to use bioenergy resources to produce hydrogen with CCS.
• Commit 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.

The Scottish Government is committed to providing a supportive policy and regulatory environment to support hydrogen production and use and to enable Scotland to take a pioneering role in a growing global industry. This means:

In the 2020s – Demonstration, accelerating market demand and getting the policy framework right: supporting research, innovation development and demonstration, building capability, and building partnerships with organisations and governments in Europe and beyond. Providing support for low-carbon hydrogen production and supporting the transition of existing supply chain companies in Scotland to develop and manufacture new technology in the hydrogen value chain. Establishing hydrogen demand in transport and industrial applications with supportive actions and investment, including access to public and private finance.

In the 2030s – Production at Scale: scaling up and bringing down costs, developing the value chain for renewable and low-carbon hydrogen; developing competitive, large scale, low-cost hydrogen for domestic use. Developing floating hydrogen production and an export industry for hydrogen and its derivatives.

By 2045 – Scaling up and global expansion: Enabling production of lowest cost green hydrogen for domestic use and for export, development of international hydrogen refuelling hubs, international transportation of hydrogen, including shipping and North Sea hydrogen pipeline infrastructure connecting Scotland to Europe.