Report calls for targeted investment to optimise hydrogen

Using excess electricity generated by wind to manufacture hydrogen could currently only provide enough fuel to replace a tiny fraction of the natural gas used in domestic heating, a new report has warned.

This is one of the problems to be overcome in the transition to a hydrogen economy outlined in a study, published today (20 September) by the Policy Exchange think tank, entitled “Fuelling the Future”.

Using the electrolysis process to produce hydrogen has been touted as a way of using “spare” wind, which has to be curtailed to minimise congestion on the transmission network from this inherently intermittent source of generation.

It says that last year 1.5TWh of wind was curtailed, which would produce only enough hydrogen to replace less than 0.5 per cent of natural gas used domestically.

In the longer term if the level of curtailment increases to 75TWh by 2050 and heat demand stays relatively constant, this surplus wind could provide approximately 14 per cent of the UK domestic heating load, the report estimates.

Another problem, it says, is that electrolysers have to run constantly to deliver value for money.

“Only using curtailed power – which is limited – is likely to be uneconomic.

“Business models based solely on curtailed wind are therefore unlikely to be compatible with this type of capital intensive industry with low margins.”

But it says that, given the potential for electrolysis to deliver greater cost savings than other methods for producing hydrogen, the government should consider targeted investment to reduce the cost of electrolysers.

It recommends that the government could make better use of green heating subsidies by including hydrogen in the technologies that are eligible for support under the renewable heat incentive (RHI) scheme.

It says that hydrogen produced from electrolysis would deliver carbon savings at approximately half the price of heat from air source and ground source heat pumps, both of which benefit from support under the RHI.

“A support framework along these lines would ensure greater affordability to the taxpayer and make subsidies go further.”

The report also says that a blend of 80 per cent natural gas and 20 per cent hydrogen will only deliver an emissions saving of around five per cent.

And even this small reduction would be wiped out if existing cheap methods for manufacturing hydrogen, steam methane reformation or coal gasification without carbon capture and storage (CCS), are used.

Fully replacing natural gas with hydrogen by 2050, with large scale production commencing in 2030, would require a minimum of 6GW of new hydrogen capacity to be built per year. This would equate to a rate three times as fast to the rollout of wind generation over a 20-year period.

It says completely replacing the natural gas used in industry with hydrogen could cut industrial emissions by 71 per cent, but more research and investment in infrastructure is needed to reduce the cost of producing the gas so that it is cost-effective for businesses.

Joshua Burke, senior energy and environment research fellow at Policy Exchange, said: “The versatility of hydrogen offers big opportunities to help overcome some of the challenges the UK faces when transitioning to a low carbon economy – but we are far from realising them yet. Two issues need addressing.

“Firstly, we need to focus on getting cost-effective, scalable and sustainable production methods to reach mass market. Targeting investment towards reducing the high cost of producing large volumes of low carbon hydrogen is crucial.

“Secondly, we must decide the most appropriate applications of hydrogen within our economy, given potential uses are likely to be highly interconnected and this will have implications for the energy system.”

A spokesperson for Uniper, which is one of the report’s sponsors, said: “Today’s report throws a spotlight on some of the exciting opportunities presented by the emerging hydrogen economy – but like us, it is also clear about the investment and leadership that are crucial if the potential is to be realised.”