A Trading Nation: Realising Scotland's Hydrogen Potential - A Plan for Exports

1. Introduction

Scotland has vast renewable energy resources. Our ambition for renewable electricity generation is to double Scotland’s overall renewable capacity to 35-39 GW by 2030^[1]. This wealth of renewable electricity will be the primary route to decarbonisation for many parts of our energy system and will additionally support electrolytic production of hydrogen at scale, opening new economic opportunities for Scotland to become a leading producer and supplier of renewable hydrogen in the UK and exporting this into key European markets.

The Scottish Government has an international vision for the hydrogen economy in Scotland. This export-specific plan identifies the necessary steps for Scotland to realise these opportunities and become a net exporter of hydrogen and hydrogen products, whilst also harnessing the export opportunities across hydrogen supply chains. As outlined in the Hydrogen Action Plan (HAP)^[2], and supported by our export growth plan, A Trading Nation (ATN)^[3], our ambition is to support the delivery of 5 GW of low-carbon hydrogen production capacity by 2030, and 25 GW by 2045^[4]. The export plan includes a Framework detailing the steps required to realising the export opportunties in Scotland.

There is growing demand for renewable and sustainable energy across the globe, driven in response to efforts to decarbonise economies and the setting of ambitious Net Zero targets. The recent destabilisation of global energy markets means that hydrogen is now seen as a key part of future energy strategies for many nations, including both potential export nations such as Scotland and those that will continue to be reliant on imports for their energy needs.

Scotland is particularly well placed to respond to others’ import demand through its capacity to produce significant quantities of renewable and low-carbon hydrogen and hydrogen products, as well as by utilising its skills, experience, and knowledge gained over decades in the energy supply chain sector to support the development of hydrogen projects globally.

Developed in partnership with industry leaders, public sector partners, academia and across government, this plan is underpinned by new research that provides further evidence of the growing international demand for hydrogen and hydrogen products, as well as international trade opportunities for the Scottish hydrogen supply chain. The Worley Hydrogen Demand Study can be located online and the Arup Supply Chain Study online.

The potential international trade opportunity from hydrogen is considerable, with recent International Energy Agency (IEA) forecasts^[5] suggesting global demand for hydrogen, for use directly, or to be converted to hydrogen products, could reach 70 Mt in 2030 and over 400 Mt by 2050^[6]. A significant portion of this will be internationally traded.

Scotland’s significant natural resources, our long-standing experience in the onshore and offshore energy sectors, our growing domestic hydrogen sector, and our proximity to key markets mean that the developing international hydrogen market represents a substantial new opportunity for Scottish exports. The Scottish Hydrogen Assessment^[7], completed in 2020, estimated that by 2045 approximately 3.3 Mt (126 TWh) of renewable hydrogen could be produced in Scotland, with approximately 2.5 Mt (94 TWh) of that either supplied to the rest of the UK or exported to other European markets annually.

This plan builds on the ambition statement and export vision set out in our HAP, and clearly sets out the practical and sequential steps needed to fully realise Scotland’s export potential in hydrogen.

Source: Scottish Government Hydrogen Export Opportunities

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Research and market insights have predicted significant demand for Scottish hydrogen and hydrogen products across the globe. With our significant resources to produce renewable energy, linked to our extensive experience and skills, Scotland is ideally placed to grow both its domestic and international markets for commodity and its supply chain.

• Assurance of Demand

Critical in giving confidence to industry and others to enable the relevant investments in Scotland to capitalise on the global hydrogen opportunity. Research has shown significant demand already exists in markets that could be serviced from Scotland such, as Germany.

• Assurance of Supply

International markets will want to see a clearly articulated plan of how we aim to grow the production of hydrogen in Scotland beyond an ambition statement. Markets will want to see a clear roadmap of critical projects that will focus on delivery.

• Connectivity Pillars

These are the building blocks that Scotland will need to have in place to develop into a producer and exporter of significant levels of hydrogen. This includes scalable production projects, hydrogen pipelines, new offshore wind developments, ports and storage.

• Critical Enablers

There are many key enablers and decisions that will need to be taken to provide the investment and policy changes required for the sector to grow and to confirm Scotland as a hydrogen nation.

Markets for hydrogen are developing at pace in the UK and overseas, with the development of domestic and export markets both interdependent and complementary. In December 2023, the UK Government announced the results of the first Hydrogen Allocation Round (HAR1)^[8], with 11 projects across the UK (two of which are in Scotland) receiving £2bn in revenue support under a 15-year revenue support model, similar to a Contract for Difference. HAR2 is underway, and the UK Government is currently developing its approach to future HARs. The build out of Scottish production and supply chain capability will support UK energy security and decarbonisation goals, stimulating domestic markets and helping satisfy export demand which will help drive forward investment and sustainable development that will satisfy both.

In north-western Europe, Governments and the EU are also mobilising to create demand for low-carbon hydrogen and incentivise production. This acceleration of the global hydrogen economy creates opportunities for Scottish produced renewable hydrogen, both with the UK and as exports internationally, providing the stimulus for demand necessary for rapid sector development.

Together, this export-specific plan, our HAP and Green Industrial Strategy, provide the strategic pathway to develop a sustainable and successful hydrogen sector in Scotland.