Scottish Government Hydrogen Policy Statement

Chapter 2. Hydrogen within the Energy System

Policy Priorities: Hydrogen within the Energy System

We will support the continued development, use and production of hydrogen from renewable and low-carbon sources, i.e. green and blue hydrogen.

We will investigate the role of hydrogen in the development of Negative Emissions Technologies.

We recognise the potential for hydrogen to play a role in the decarbonisation of transport, heat, industry and also to potentially replace natural gas in the provision of back-up electricity generation and we will seek to fully explore these opportunities

We recognise the potential role for hydrogen in energy storage and will seek to explore this further.

Large scale renewable hydrogen production may provide an essential energy balancing and flexibility function to integrate the expected large increases in offshore wind into our energy system – under current constitutional arrangements, and recognizing our respective responsibilities, we will work with the UK Government to ensure alignment of policies and that market mechanisms are developed in tandem to reflect this system need.

We will produce a regulatory roadmap for hydrogen which will identify barriers to the use of hydrogen in the energy system and production at scale.

We also address challenges to deployment such as cost reduction and take forward findings in our Hydrogen Action Plan.

Whole Systems Approach

Hydrogen will be extremely valuable across the whole energy system, with the potential to help decarbonise a range of high emissions sectors such as buildings, power, transport and industry.

The introduction of hydrogen at scale creates a new energy carrier capable of capturing, transporting and storing energy. The benefits are potentially substantial. From the integration of renewables, to the large scale inter-seasonal storage of clean energy, hydrogen has the potential to change the way we think about energy.

With the breath of applications for hydrogen, it will be critical that we plan for hydrogen using a systems-approach across all of our energy production, transportation and use sectors.

It is likely the most effective way to integrate hydrogen into our energy system, and our economy, is through the establishment of sector-coupling hydrogen production hubs capable of simultaneously servicing transport, heat and industry needs. It is a vision such as this that we are starting to develop through this policy statement and the Action Plan that will follow in 2021.

Once markets develop hydrogen can help address renewable intermittency as a commercial opportunity through its production by electrolysis at times of excess electricity supply – that is, when there is more renewable generation available than demand for electricity, or where our electricity networks are operating at their limit. Converting that wind power into hydrogen can provide developers with new routes to market, and may change the investment proposition for new and existing renewables generation.

Electrolysis can also lead to greater integration of the gas and electricity grids – subject to work currently being pursued into the capability of our existing gas network and pipelines to accommodate low carbon gases, including hydrogen (see example of the H100 Fife on page 31).

Hydrogen can also be used for direct power production – potentially displacing natural gas as a provider of back–up, flexible power generation on the system, and the vital technical qualities which generation of this kind provides for system stability.

Hydrogen may also provide the option of storing energy, either as hydrogen or ammonia, over extended time periods and, potentially, deployable at scale.

A stable, managed energy transition

Hydrogen is an important transition opportunity for Scotland's mature oil and gas industry, and a just transition that supports sustainable economic growth and jobs.

Hydrogen is mostly used as a gas. If it is to play a larger role in our future energy mix we will need the skills of people and companies that know how to produce, manage, compress, transport, store, and reconstitute gas. Many of the skills and the supply chain requirements for future hydrogen systems and infrastructures are to be found in our oil and gas industry today.

Scotland is a net exporter of electricity and in the past decade renewable electricity output has grown markedly. In 2018 more than 83% of the electricity generated in Scotland came from renewable or low carbon sources. Between now and 2032 we will see a further substantial increase in renewable generation, with the development of new offshore and onshore wind capacity supporting the increased electrification of transport and heating.

Our Offshore Wind Policy Statement^[7] set out our ambition for up to 11 GW of offshore wind generation in Scottish waters by 2030 – this is a key linked document to inform our Hydrogen Policy Statement and our proposed Action Plan.

Our vast offshore wind resources, skilled technicians, and engineers, highly specialised technical companies and an experienced offshore workforce will be able to assist in bringing forward large scale green hydrogen production. There are gaps in the skills supply chain for hydrogen production that we need to understand and address, but we start from a strong base.

Case Study - Aberdeen Hydrogen Hub

The Aberdeen Hydrogen Hub is a regional collaboration proposal, involving Aberdeen City Council, Scottish Enterprise and Opportunity North East, taking a whole-system approach to hydrogen production and demand to drive scale and economic growth.

The 'Aberdeen Hydrogen Hub' aims to deliver a commercially scalable and investable, growth-focussed hydrogen production site making use of the region's offshore wind resources. This will kick start growth of the hydrogen sector in the region, initially for transport, with further opportunities for growth in heat, industry and beyond in the future. If successful, this is a model which could be suitable for replication in various regions of Scotland.

The Hub is among one of the projects being supported by Scottish Government funding via our £62m Energy Transition Fund (ETF), launched in June 2020.

The project has so far been awarded £4.5m enabling the procurement of an additional ten hydrogen double decker buses to add to the existing hydrogen bus fleet in Aberdeen to help anchor hydrogen demand and enable future buildout phases of the Hub.