Scottish Government Hydrogen Policy Statement

Chapter 7. Hydrogen for Industry

Policy Priorities: Hydrogen for Industry

Industrial use of hydrogen will be crucial in developing the initial market demand for low cost hydrogen production in Scotland.

We will work with the major point emitters in Scotland to assess applicable decarbonisation solutions, including opportunities for fuel-switching to hydrogen and the opportunities that large-scale hydrogen production can offer industry.

We support the deployment of the Scottish Net Zero Roadmap (SNZR) which will set out a pathway for industrial decarbonisation, including CCS and Hydrogen fuel switching.

We will support ambitious industrial applications for renewable and low-carbon hydrogen through support for studies and deployment via funds such as our £34 million Scottish Industrial Energy Transformation Fund.

We are particularly supportive of the roll-out of hydrogen hubs which bring together hydrogen production, CCS and transport in one place or hub. Our Energy Transition Fund is already enabling the development of one such hub: a Hydrogen Model Region in the North East.

Hydrogen's greatest medium to long-term potential may be in the industrial sector, which uses the majority of today's hydrogen, particularly in oil refining and in ammonia, methanol, cement production and steel milling.

There are four primary technological means to decarbonise industrial processes, including combustion processes – electrification, energy efficiency, CCS and hydrogen, and all will be required. Around half of Scottish industrial emissions come from combustion of fossil fuel, mainly natural gas and process gases. Substitution by renewable or low-carbon hydrogen may represent a practical option to reduce these emissions across all industrial sectors.

Scotland's industrial clusters represent numerous co-located and localised heavy industry units with diverse processes including chemicals, petrochemicals/refineries, metals, food and drink, cement, paper and pulp, and glass.

Industrial processes are often difficult and costly to decarbonise due to their complexity, their scale, and their specific technical requirements, which are in many cases based on fossil fuel inputs. This is particularly the case where a high temperature is required or a specific feedstock is essential for the chemical process. Hydrogen combustion offers a route by which industries can obtain high heat without direct greenhouse gas emissions.

Hydrogen is already produced in Scotland for use as a feedstock in chemical production. This hydrogen is currently 'grey', meaning it is produced from the reforming of natural gas with the process releasing unabated CO2 into the atmosphere, and could switch to blue or green in the future.

Hydrogen could potentially replace natural gas for industrial users connected to the gas network in Scotland. As with domestic and commercial heating, this could initially be a blend of hydrogen with natural gas, before the full conversion to 100% hydrogen. Renewable hydrogen also has the potential to impact on the decarbonisation of industry in terms of space heating and for use in industrial processing and manufacturing.

Anchor loads of industrial use hydrogen can help bring hydrogen, more viably, to adjacent users such as for domestic heat, or non-domestic buildings. This could help to share the costs of infrastructure to enable a widening deployment of hydrogen.

Deep Decarbonisation Pathways for Scottish Industries

Earlier this year we commissioned an assessment of the viable pathways to deeply decarbonise Scotland's industrial subsectors by improving energy efficiency, replacing fossil fuels with hydrogen, electricity or, in limited cases, bioenergy (collectively termed 'fuel switching') and implementing CCUS.

Electrification is an option for some industrial processes, such as lower grade heating, but efficiency and technical constraints may be a barrier to electrifying higher grade industrial heat applications.

The use of hydrogen to displace fossil-based fuels and the application of carbon capture technologies present a significant opportunity to decarbonise sections of our industrial sector for which energy efficiency measures and electrification alone will not provide the required emissions savings.

The development of a CCS network is a critical enabler for the production of low-carbon hydrogen in industrial decarbonisation and negative emissions technologies such as BECCS and DACCS. The most ambitious scenario in the Scottish Hydrogen Assessment assumes that low-carbon hydrogen production aligned with CCUS could credibly reach an installed capacity of 200 MW by 2025, 2 GW by 2032 and 5 GW by 2045.

The industrial decarbonisation pathways analysis concluded that with extensive uptake of fuel switching and CCUS deployment it should be possible to reduce emissions from the industries in scope by over 80% compared to 2018 levels by 2045. Deep decarbonisation therefore hinges on the availability of CCS and the ability to electrify or switch to hydrogen feedstock, as well as the availability of infrastructure to enable the early implementation of CCUS and low carbon fuel switching at Scotland's largest emission sources.

A Scottish Net Zero Roadmap for the decarbonisation of the Scottish industrial cluster is being developed by NECCUS, the Scottish Government supported industry alliance for decarbonisation. The SNZR is one of six UK industrial cluster plans intended to aggregate and inform a UK wide industrial decarbonisation plan.

The potential for hydrogen to be used to decarbonise Scottish industrial processes, must be carefully studied sub-sector by sub-sector. A partnership approach between government, agencies, energy-intensive industries and other relevant stakeholders will be crucial in planning for a just transition towards lower-carbon, and ultimately zero-carbon, industrial production. Sequencing the viable deployment of hydrogen infrastructural needs for industry will require long-term planning and collaboration.

We recognise the importance of fiscal support mechanisms and prompt deployment of enabling infrastructure and support for technology development needed by companies who are developing their decarbonisation plans and making long-term investment decisions. We have created the Advancing Manufacturing Challenge Fund, our Innovation Centres and the National Manufacturing Institute Scotland (NMIS), that are capable of fundamentally changing how companies harness the power of technology and innovation to drive growth.

We continue to engage with the UK Government on future carbon pricing arrangements for industry which in future could provide the price signal for investment in switching to hydrogen.

We also recognise the importance of ensuring policy decisions do not disadvantage Scottish companies competing in international markets and avoid the risk of carbon leakage. It is, therefore, key that the UK Government provide clarity on the business and regulatory framework to support the deployment of CCUS infrastructure to enable the production of low-carbon hydrogen.

The Scottish Government encourages fuel efficiency and the adoption of low-carbon technologies including hydrogen across all industrial sectors through our supportive policy environment and innovation and demonstration funding support including the Low Carbon Infrastructure Transition Programme, the Low Carbon Manufacturing Challenge Fund, and the Energy Transformation Fund.

Case Study - CCUS, the low-carbon hydrogen enabler

The Acorn CCS project at the St Fergus Gas Terminal in the North East of Scotland has the potential to store 10 million tonnes of CO2 per annum by 2030, growing to 20 million tonnes per annum by 2035, and unlocking access to over 20 GT of CO2 storage resource.

The Acorn Hydrogen project developing in parallel to Acorn CCS, will reform North Sea natural gas into clean-burning hydrogen. The CO2 emissions created from generating the hydrogen will be safely removed and stored using Acorn CCS infrastructure. The project is scalable and will initially produce approximately 50,000t/y of clean hydrogen and 500,000t/y of CO2 for sequestration by 2025.

Located at an injection point for the national gas transmission system low-carbon hydrogen could be produced for blending into the gas grid in increasing quantities until 100% hydrogen is established. It is also linked to large scale industrial emitters in the Grangemouth area via a network of existing onshore pipeline infrastructure and existing shipping facilities.

The project presents an economic opportunity for the deep-water port at Peterhead for potential import and export of CO2 and Hydrogen.

It is anticipated Acorn CCS will be operational by 2024 and hydrogen production will start in 2025.