UK government to ‘kickstart’ low-carbon hydrogen economy, with payments to big polluters to slash emissions

The UK government is to spend just over £100m to “kickstart a world-leading hydrogen economy”, which it hopes will help the fuel become a major energy source and play a significant role in decarbonising heavy industry.

Hydrogen has long been tipped as a clean green fuel that might be used to replace fossil fuels in combustion-based sectors that are more difficult to electrify, such as aviation, shipping, steel and chemical production and other heavy industry.

In a statement, the government said that “a booming, UK-wide hydrogen economy could be worth £900m and create over 9,000 high-quality jobs by 2030, potentially rising to 100,000 jobs and worth up to £13bn by 2050”.

On Tuesday, the government said its first action would be to provide payments to “support polluting industries” to slash their emissions.

“A £105m funding package through its Net Zero Innovation Portfolio … will act as a first step to build up Britain’s low-carbon hydrogen economy,” the statement said.

“The investment will help industries to develop low-carbon alternatives for industrial fuels, including hydrogen, which will be key to meeting climate commitments.”

The government cited analysis suggesting that 20-35 per cent of the UK’s energy consumption by 2050 could be hydrogen-based.

“This new energy source could be critical to meeting our targets of net zero emissions by 2050 and cutting emissions by 78 per cent by 2035,” the Department for Business, Energy and Industrial Strategy said.

The business and energy secretary Kwasi Kwarteng said: “Today marks the start of the UK’s hydrogen revolution. This home-grown clean energy source has the potential to transform the way we power our lives and will be essential to tackling climate change and reaching net zero.

“With the potential to provide a third of the UK’s energy in the future, our strategy positions the UK as first in the global race to ramp up hydrogen technology and seize the thousands of jobs and private investment that come with it.”

Energy and climate change minister Anne-Marie Trevelyan said: “Today’s Hydrogen Strategy sends a strong signal globally that we are committed to building a thriving low-carbon hydrogen economy that could deliver hundreds of thousands of high-quality green jobs, help millions of homes transition to green energy, support our key industrial heartlands to move away from fossil fuels, and bring in significant investment.”

However, there are already mounting concerns about how hydrogen-based fuels are produced and their overall impact on the environment.

Producing hydrogen is an energy-hungry process in itself, and unless all the hydrogen is produced using renewable energy, such as wind or solar, then rising demand for hydrogen fuels to replace fossil fuels could ironically lock in greater dependence on fossil fuels.

There are two main types of hydrogen that can be produced, known as “green hydrogen” and “blue hydrogen”.

Green hydrogen is made by splitting water into hydrogen and oxygen using electrolysis, with the necessary electricity provided by renewable sources.

Meanwhile, blue hydrogen is produced through mixing natural gas with hot steam in the presence of a catalyst. This creates hydrogen and carbon monoxide. Water is added to the mixture, which converts the carbon monoxide into carbon dioxide and also creates more hydrogen.

The resultant carbon dioxide emissions are then, in theory, captured and stored using “carbon capture and storage” technology.

The UK government said it was taking “a ‘twin track’ approach to supporting multiple technologies, including ‘green’ electrolytic and ‘blue’ carbon-capture-enabled hydrogen production”.

But research released this month by academics at Cornell and Stanford Universities has warned that the blue hydrogen process could generate 20 per cent more emissions over its life cycle than burning the natural gas in the first instance – and possibly even more.

A co-author of the study, Cornell University professor of ecology and environmental biology Robert Howarth, said: “Politicians around the world, from the UK and Canada to Australia and Japan, are placing expensive bets on blue hydrogen as a leading solution in the energy transition.

“Our research is the first in a peer-reviewed journal to lay out the significant life-cycle emissions intensity of blue hydrogen. This is a warning signal to governments that the only ‘clean’ hydrogen they should invest public funds in is truly net-zero, green hydrogen made from wind and solar energy.”

Greenpeace also voiced concerns over the government’s support for blue hydrogen.

Dr Doug Parr, chief scientist for Greenpeace UK, said: “Hydrogen produced from renewable energy is genuinely low-carbon, and genuinely useful in some areas of the economy where electrification is difficult. But producing large quantities of hydrogen from fossil gas locks us into costly infrastructure that is expensive and, according to a study published last week, may be higher-carbon than just burning the gas. So the emphasis put on that part of the government’s plan looks like a bad idea both environmentally and economically.

“Asking householders to pay extra on their fuel bills to potentially increase their carbon emissions will not be popular with anyone apart from the gas companies. And a glance round the world at other countries’ plans shows that persuading them to buy our high-cost but only nominally low-carbon hydrogen is going to be a tough sell.”

The government said its new “Hydrogen Strategy” is based on the UK’s previous success with offshore wind.

One of the tools used by the UK to support the establishment of offshore wind in the UK was the Contracts for Difference (CfD) scheme, which incentivises investment in renewable energy by providing developers with direct protection from volatile wholesale prices and protects consumers from paying increased support costs when electricity prices are high.

The government said it was therefore launching a public consultation inspired by this mechanism, which it hopes may help to overcome the cost gap between low-carbon hydrogen and fossil fuels, helping the costs of hydrogen-based fuels to fall quickly.

The government is also consulting on the design of the £240m Net Zero Hydrogen Fund, which it said will support the commercial deployment of new low-carbon hydrogen production plants across the UK.

The government provided a statement from the National Grid’s hydrogen director, Antony Green.

He said: “The transition to a green economy will require a mix of technologies and hydrogen will play a vital role. This strategy signals the UK’s commitment to hydrogen and provides the certainty needed to boost consumer and investor confidence and support commercial solutions.

“Importantly, unlocking the potential of hydrogen as a clean energy solution requires significant pace and innovation to scale up production, and the guidance from the government today will be key to triggering the investment and buy-in needed to achieve this.”