Hydrogen from excess wind could decarbonise UK steel

The UK’s steel industry could be entirely decarbonised with green hydrogen produced from wind generation, which would otherwise have to be switched off due to grid constraints, according to modelling carried out for a new report.

Right-wing thinktank Policy Exchange’s Wasted Wind to Clean Hydrogen report says the growing costs of congestion on the grid – predicted to grow to £3.5 billion a year by the end of the decade – is holding back development of the UK’s “world-class” wind fleet.

According to modelling conducted by consultancy LCP Delta for the research, the UK’s curtailed wind generation was sufficient to produce over 118,000 tonnes of green hydrogen in 2022.

This figure is set to rise to 455,000 tonnes by 2029, which would provide enough hydrogen to entirely decarbonise the UK’s 7m tonne annual steel manufacturing, the report says.

This quantity, which would deliver two-thirds of the UK’s 2030 target for hydrogen produced by electrolysers, could alternatively meet more than 90% of the government’s national Sustainable Aviation Fuel (SAF) target for the same date.

Payments to renewables developers with CfDs (Contracts for Difference), who have been told to curtail their output due to grid constraints, are due to surpass £3.5 billion annually by the end of the decade, the report claims.

This curtailment could instead be used to produce green hydrogen by using electrolysis to break down water into its constituent hydrogen and oxygen molecules.

“Scaling electrolysers as a flexible energy resource throughout the nation will allow for far greater integration of wind generation than currently possible, particularly of those assets otherwise waiting over a decade for a grid connection,” it says.

The report recommends a string of measures to break the hydrogen sector’s “acute chicken-or-egg problem” caused by large upfront costs that put off both hydrogen producers and users from investment.

These include amending the CfD regime to provide existing generators with a stronger incentive to cut down receipts of constraint payments and redirect their generation for productive purposes.

Contracted generators in highly constrained grid locations should be required to adopt Constraint Management Plans (CMPs) for their output, including financial incentives for entering into agreements with electrolysers.

For future CfD auctions, advantages should be offered in grid constrained locations to bids with comprehensive CMPs that include use of electrolysis to produce green hydrogen.

The report also suggests that generators lacking CMPs may see their constraint payments scaled back in the long-term.

Generators in constrained areas should be incentivised to develop and execute CMPs that reduce congestion through offtake agreements with electrolysers through reduced Transmission Network Use of System (TNUoS) charges.

For future generation assets a major incentive for adopting comprehensive CMPs would be offering a “significant reduction or complete waiver” on connection charges.

Electrolysers should also be entitled to share CMP payments if their consumption leads to lower constraint costs, the report recommends.

It adds that the government should permit blending of hydrogen into the gas grid on an interim basis in order to provide a reserve source of demand for green hydrogen electrolysed in constrained grid locations where commercial off-takers do not exist.

“The government must adopt a flexible approach that empowers industry leaders to innovate and deliver individually tailored solutions that can accommodate their unique technological, geographic and commercial circumstances.”

Angus MacNeil MP, chair of the House of Commons energy security and net zero committee and the report’s foreword author, said: “We have every opportunity to make more efficient use of our existing energy infrastructure and leverage wasted renewable energy into clean hydrogen.

“The potential output is massive, worth two thirds of our electrolysis target for 2030.”