Leading role for hydrogen means greater reliance on natural gas

If hydrogen is to play a leading role in meeting Great Britain’s energy needs, then most will need to be extracted from natural gas, a new study from Aurora Energy Research has concluded.

The amount of hydrogen that can be produced using renewables will be limited by generation capacity and the availability of cheap excess power.

The findings are based on modelling of two main scenarios for reaching net-zero greenhouse gas emission by 2050: one in which the power grid is dominated almost entirely by renewables, and another in which nuclear and gas with carbon capture and storage (CCS) account for a substantial proportion of generation capacity.

Analysts explored what would happen in each of these scenarios if hydrogen was variously used to meet a half, a quarter or almost none of total energy demand in Great Britain.

The study found that if hydrogen was used to meet half of total energy demand, then so-called blue hydrogen – produced by reforming natural gas with CCS – would need to account for the majority of supplies, regardless of the generation mix.

If it was used to meet only a quarter of total energy demand, then green hydrogen producing using electrolysis could take the lead, but not if there was substantial nuclear and gas generation.

Either way, Aurora expects market prices for hydrogen, including transportation and storage, to fall to between £50 and £60/MWh by 2040 and below this range by the middle of the century. It said blue hydrogen technologies are likely to be at the top of the merit order and therefore set prices on most days.

The market intelligence firm also predicted that hydrogen turbines could become come cost competitive with conventional gas turbines as a source of flexible generation.

Aurora said there is no decisive difference in costs between any of the scenarios it examined, including the ones in which hydrogen plays a negligible role and almost all energy demand is electrified: “Generally, hydrogen scenarios require additional investments on hydrogen transmission and distribution infrastructure and present higher energy costs, but lower spending on low-carbon power subsidies, power network costs and power capacity market spending.

“However, the implication of the report is that a hydrogen pathway could boost UK’s industrial competitiveness, with economic benefits in areas where there are fewer economic opportunities. Specifically, it would enable the development of globally competitive low-carbon industrial clusters, particularly around Humber and Teesside.

“It will also utilise UK’s comparative advantage on blue hydrogen and CCS due to the availability of usable carbon storage, which could make the UK a leader in terms of hydrogen production costs until merchant green hydrogen becomes competitive in 15 to 20 years.”

Felix Chow-Kambitsch, head of commissioned project in western Europe at Aurora Energy Research, said: “Stimulating the development of hydrogen infrastructure in the UK could facilitate the low-carbon energy transition as part of the UK’s efforts to hit its net zero target and unlock opportunities across UK industry and transport.

“Hydrogen could eventually meet up to 50 per cent of total energy needs – across power, heating, industry and transport. The accelerated deployment of low-carbon power generation will enable utilities to create hydrogen from surplus power, while carbon capture technology enables the decarbonisation of natural gas and provides the required scale to the hydrogen sector.

“Unlocking the benefits of a hydrogen economy will require early support from government, systematic changes to our energy system and significant investment by the private sector.”