UK must revamp hydrogen policy to catch up with rivals

The UK has fallen behind Europe and the US in the race to attract hydrogen companies to the country and must react quickly with better policy support, delegates heard at the Renewable Energy Association hydrogen conference in London.

"The UK is getting behind and needs to do more projects," Siemens Energy head of market and government affairs Matthew Knight said. The UK government had said it wanted to award support for a combined 200MW of electrolytic hydrogen projects by the end of 2020, but so far it has awarded support to no projects greater than 5MW. "Investors say the UK system seems slower, more complicated and riskier compared with what's on offer elsewhere," Knight said.

In contrast, Germany has awarded support to six electrolyser projects greater than 5MW, which partly underpinned Siemens Energy's decision to establish its manufacturing facility in Berlin, Knight said. Manufacturers will follow the demand when choosing a location, and once they set up, they are unlikely to move, he added.

The UK looks to have lost out on a large part of the stack manufacturing market, but it is not too late for the country to attract companies focused on other components of hydrogen plants if the government engages with individual projects to provide tailored support to accelerate their progress, according to Knight.

He emphasised flexibility. Part of the problem stems from asking electrolytic projects of a few megawatts to apply for funding via the same mechanism as massive blue hydrogen projects, two industries that are "as different as nuclear as solar", Knight said. "The hydrogen business model is really good for big hydrogen projects but not the right thing for 10MW, 20MW, 50MW projects that we need to do first."

For their part, the UK's leading blue hydrogen projects say they cannot take final investment decisions until the UK finalises its £100mn hydrogen business model mechanism, which provides revenue support to make the plants viable. Norway's Equinor originally planned to take a final investment decision on its 600MW Humber plant in the fourth quarter of 2023, but it is now more likely to in the first quarter of 2024 or even later due to uncertainty on policy. The project also depends on the east coast carbon capture network being finalised, Equinor project manager Ian Livingston said at the conference.

Vertex Hydrogen plans to take a final investment decision on its 350MW northwest England facility in the third quarter of 2023, but this also depends on the hydrogen business model being agreed. "The policy is very smart, but the main concern is speed and scale," Vertex chief executive Joe Seifert said last month. "The US has announced $350bn support for energy transition and it's a very simple policy," he said. If the UK is too slow, it will face competition for personnel and materials from US projects which would make everything more expensive, he added.

The industry expected the hydrogen business model to be signed into law in early 2023, but the timeline was thrown into doubt after work on it was suspended while the UK prepared emergency legislation to tackle rising energy bills. "The government is aiming to finalise the hydrogen production business model in 2022," a spokesperson from the UK's Department for Business, Energy and Industrial strategy (Beis) told Argus.

The UK's hydrogen industry is not alone in its frustrations. European industry members have called for politicians to prioritise speed over perfectionism when designing policy, while the EU's complaints about US incentives highlight the bloc's own anxieties about competition.

By Aidan Lea