Economies of scale can make hydrogen ‘cost effective’ for heating

Boosting the volume of hydrogen production will lower its costs, which an energy minister has identified as a block on mass uptake of the fuel in home heating, industry experts have told Utility Week.

At a fringe meeting at the Conservative party conference on Monday (4 October), ex-senior energy civil servant Simon Virley acknowledged that hydrogen is currently expensive, as Lord Callanan noted at an earlier session.

The minister, who is overseeing work on the heat and building strategy, said that displacing gas with hydrogen from home heating is “pretty much impossible”.

But Virley, who is now head of energy and natural resources at KPMG, told yesterday’s meeting that he expects the cost of hydrogen production will fall, like wind farms and solar panels over the past decade.

He said KPMG’s own analysis suggests that hydrogen will be cheaper than natural gas taking into account the government’s own carbon price assumptions within the next decade.

“If you think about the cost trajectories we have seen in wind and solar. I can’t see why, if it follows that cost trajectory, hydrogen should not be cost effective within that period.

“Let’s get behind it and the cost trajectory will come down.”

He was backed up by Andrew Storer, chief executive officer of the Nuclear Advanced Manufacturing Research Catapult, who told the Hydrogen All Party Parliamentary Group meeting that increased production of the gas will deliver economies of scale.

And Melanie Taylor, head of stakeholder relations at Northern Gas Network, said that modelling carried out by Lord Callanan’s own department (Business, Energy and Industrial Strategy) shows that injecting hydrogen into the gas network will result in lower system-wide charges than complete reliance on electrified domestic heating.

Earlier Virley had welcomed the government’s recently published hydrogen strategy but expressed concern that it not being delivered at the “pace and ambition” required in some areas.

Referring to the government’s stance that it will decide on the future of home heating in the middle of this decade, he said: “We shouldn’t take five years to make a decision on the role of hydrogen in home heating. We are already proving that hydrogen should work and there is more to do but I really don’t think it should take another five years to get to that in principle decision.”

Virley also said that the government’s target of 5GW of hydrogen production by 2030 is insufficiently ambitious, and “should be at least doubled or trebled”.

Angie Needle, director of strategy at Cadent Gas, said the 5GW target could have been “significantly higher” because she knows that there are “at least four times” as many hydrogen projects in the pipeline.

Lord Callanan’s doubts about hydrogen were echoed by a Conservative member of the House of Commons Environmental Audit Committee yesterday.

At a meeting on low carbon heat, Jeremy Mayhew MP said there will “never” be sufficient quantities of hydrogen for domestic use so it should be reserved for more specialised areas.

The sheer amount of electricity required to produce green hydrogen means that the higher emitting blue version of the gas would have to be used in domestic heating, which would only work if the UK developed carbon capture at massive scale, he said.