Hydrogen: The Missing Element
Abundant, powerful and versatile. Hydrogen, the mysterious molecule, raises as many questions as it does answers.
“The thing with hydrogen is that it needs to find out what it is good at. That’s what we’re doing this decade,” says Barny Evans, leader of WSP’s Net Zero advisory business.
Finding out what hydrogen is good at on a large scale will be at the very centre of the UK government’s planned Green Industrial Revolution. With its Hydrogen Strategy set to be released soon, the private sector is waiting to see how it can get involved. There is a strong suspicion that there will be lots of opportunities – but as always in the efforts to go green, pinning them down and turning them into a pipeline of potential deals is likely to be much more difficult.
The government is not starting from scratch; important trailblazing projects have already begun in the country, including Hynet, Zero Carbon Humber, and Net Zero Teeside, but these are just the tip of the iceberg in terms of potential.
Around the world, other countries have also illustrated their hydrogen intentions with a spate of major projects. Saudi Arabia is planning a $5bn green hydrogen plant for its desert strip megacity Noum and Japan’s Fukushima Hydrogen Energy Research Field (FH2R) is the largest hydrogen facility to date, having begun last year.
“What it’s probably good at is what other things can’t do,” says Evans. So far, there are four main niches where hydrogen could yield significant opportunities for the infrastructure industry: industrial works; heat networks; storing excess energy; and transport.
As such a multifaceted technology, it’s easy to think that hydrogen’s hesitant rollout is down to feasibility concerns, however Evans suggests that’s not the case: “Most of it is not technical; they’re already in pilot projects.”
Some of these pilot projects are beginning to show real promise and scalable potential. For example, Cadent is working on the HyDeploy initiative with Keele University, which aims to prove that mixing 20% green hydrogen with natural gas in home boilers is safe.
“That creates a potentially much bigger market for hydrogen creation,” says Dan Watson, head of sustainability at Amber Infrastructure, which is an investor in Cadent. “This is really being seen as a real opportunity to decarbonise heat.”
Watson says there is more, too. “We are also working on HyNet, which is in the design stages, which is about how to decarbonise heat in the industrial sector. HyNet uses gas to create hydrogen, with the CO2 created in the process being captured and pumped offshore. That project has the potential to create a hydrogen and carbon capture and storage hub.”
The potential impact of projects like HyNet, which will revolutionise energy usage in the North West of England’s industrial sector, cannot be overstated. Each year the project will make over a million tonnes CO2 savings, and importantly, could provide a replicable model for other follow-up initiatives.
These two projects also highlight hydrogen’s versatility in terms of the ways in which it can be made environmentally friendly. Green hydrogen, being used in the HyDeploy project, is created using hydrolysis, with the electricity produced from a green source. HyNet, meanwhile, creates CO2 but then captures and stores it so that the gases are not released into the atmosphere.
While the industrial and heat sectors are gathering pace, the transport sector remains the most hotly debated, with the topic acting like “blood going in the shark tank” in the industry, according to Mark Richards, partner at Bryan Cave Leighton Paisner.
Nonetheless, heavy transport and return-to-base transport is “fast becoming a technically and commercially viable proposition across the world”, according to Arup. With the rise of Tesla and other electric cars, hydrogen looks to be losing the battle for personal transport, despite projections that the total cost of ownership per kilometre for hydrogen fuel cell electric vehicles is expected to fall by 50% by 2030.
Personal hydrogen cars illustrate one of the major risks of the sector: a technological battleground is often an investment minefield.
“These are game-changing shifts in technology, where if you get it wrong you have got a bunch of white elephants and the shareholders aren’t happy,” says Richards. “The pace of technology is such that we don’t realise it’s happening until we look back in a few years’ time.”
Whichever sectors hydrogen comes out on top of will largely be driven by governments as well as the market. “We’re at a tipping point and we have massive amounts of technology change we have to balance with policy drivers,” Richards says.
The difficulty of getting the power levers of government co-ordinated correctly to harness the potential of all these exciting propositions is enormous, but fitting hydrogen into a Net Zero strategy could be the missing puzzle piece that brings the entire picture into focus. In the UK, this task falls to the Hydrogen Strategy.
As part of the prime minister’s Ten Point Plan for a Green Industrial Revolution, the strategy has had its bar set high: to “position UK companies at the forefront of an exciting growing global market” by setting out the “hydrogen business models and a revenue mechanism for them to bring through private sector investment”.
“The private sector has always been envisaged as a key player in hydrogen,” said Professor David Frisk of the National Infrastructure Commission, in response to the plan, which built on a number of recommendations the commission had sent to the government last year.
“One of the reasons we are pleased that government has accepted our recommendation to establish an infrastructure bank is to help encourage private investment in helping to meet challenges like hydrogen development.”
While the £240m Net Zero Hydrogen Fund set up last year is a “step forward”, Frisk is looking forward to seeing the “specific proposals for crowding in the necessary private sector investment in the same way that helped achieve the leaps forward in renewable electricity production over the last 20 years”.
Whether through the infrastructure bank or other means, providing clarity to the industry and reducing risk will be vital in getting the private sector on board.
“There are questions to answer about what structure larger scale projects may take,” says Erwan Fournis, Operis director and head of advisory. Whatever forms the government does back, “co-operation between the public and private sector will be critical”, he adds.
Some hints have started to emerge already about which models are under consideration. According to a government-commissioned report by Mott MacDonald on the Tees Valley Multimodal Hydrogen plan, PPPs are currently being seen as a “potential way” to take this project forward.
Under the plans for this scheme, facilities are to be created for the production, storage and distribution of green hydrogen, acting as a testbed for the feasibility of such an approach that can be scaled up across the country if successful.
Using a large-scale hydrogen pipeline as an example, Fournis says that one of the advantages of a PPP would be that “governments will be able to have greater influence over a vital sector, while not taking on the daily operational risks”.
However, the role of the PPP in the rollout of hydrogen is going to take flexibility – a quality not often associated with lengthy fixed-term contracts.
“The models will evolve and this is something that is happening,” says Gary McCarthy, director at WSP. “As an industry we have to get our heads around it and work out how we take part.
“Everyone is looking at it, trying to understand it, asking what’s the right point to get involved. When you get the process going and start rolling, investment naturally follows.”
Although hydrogen projects of any kind are scant around the world, there is one pioneering bona fide hydrogen PPP that is proving the model’s feasibility.
Situated in French Guyana, the Centrale Electrique de l’Ouest Guyanais Hydrogen PPP, led by Meridiam, is set to deliver the world’s greatest intermittent power storage project in the world.
The plant will provide stable electricity, day or night, to over 10,000 households in the region, being charged by a solar park and storing unused energy in electrolysed hydrogen, ready to deployed when needed. At the time of going to press, it was expected to reach financial close in a matter of weeks.
This project could be replicated elsewhere, once it has proven itself, according to those behind the initiative. “It could make sense in other similar territories, we are looking at a few island projects in the Mediterranean,” says Julien Touati, partner at Meridiam, who currently oversees the development and deployment of energy transition activities.
There are still questions on the scalability of hydrogen however, with Touati noting that the project was made feasible by the cost of electricity in the region, and that it wouldn’t be value-for-money in most of Europe, or other developed areas. That being said, if the policy atmosphere in developed markets becomes supportive enough “not only in subsidies in construction but over the long term, you could manufacture highly bankable projects”, he says.
“You cannot expect the energy markets to be the sole driver for hydrogen”, Touati continues. “If governments put together schemes such as Contracts for Difference (CfD), then it would become a very different story, and could be similar to how the PPP model enables private capital to be invested in infrastructure.”
An expansion of CfDs, the scheme that unlocked major investment in renewable energy, would be a significant coup for the hydrogen sector, providing stability to economically volatile technology. With COP 26 on the way, Touati spots an opportunity: “If the UK comes at hydrogen with a detailed scheme for CfD that can be showcased in Glasgow as the example of what you can do if you want to have investable projects emerging, it would be a very strong push.
“Show the world what the UK can do, as it has always done in inventing the regulation for the infrastructure sector.”
With the shifting sands of technology moving underfoot and the ticking clock of a climate crisis in our ears, solid foundations will need to be forged for the partnership to work, whether that’s CfD, PPP, or some other approach designed to harness the private capital available for the development of new projects.
“If we go for real Net Zero, there is a bright future for hydrogen,” Touati says. “But as goes with it, there is always the same challenge: how do you make sure people are confident over time?
“There’s only one solution – partnerships.”