UK hydrogen projects find footing with state backing

New clean hydrogen projects in Britain are finding a foothold and expect to scale up over the next few decades thanks, in part, to government support.

Flames flare from a pipe in a gas terminal at Sullom Voe in the north of Shetland. (Source: Reuters/Cathal McNaughton)

Related Articles

The UK government is pouring millions of pounds into establishing a globally-recognized clean hydrogen economy which, like wind and solar before it, the industry hopes will eventually no longer require state aid to prop it up.

There is much to be done, however, including creating a demand for clean hydrogen and its derivatives, reducing costs to levels acceptable for consumers, building out the necessary infrastructure, such as renewable assets, economic electrolyzers, and pipelines, and attracting private capital to an untested, long-tail, industry.

Essential aid

Two companies that expect to benefit from state aid, Protium and Veri Energy, say the government’s help is essential.

Government efforts to define clean hydrogen at the outset, before presenting financing schemes, has meant some delays but created solid footing for the industry rollout.

“The government spent a lot of time investing in fundamental things that are not sexy and which many others have not done and are now desperately having to catch up on,” says CEO of Protium Chris Jackson.

Elements such as basic hydrogen safety implications and standards for heating, how to compare nitrogen oxide and sulfur oxide levels, how to define low carbon hydrogen, and how to measure emissions have all been examined in the British model before subsidies were proposed.

This compares to the U.S. market, where billions of dollars have been floated before the industry, but distribution of those funds are now caught up in debate over who is eligible for the aid.

“Americans and Europeans usually end up in the same place, but the Americans make sure that the bang at the beginning is better,” says Jackson, who also hosts the ‘Everything about Hydrogen’ podcast.

“So, the United States announced upfront what they want to do and all the money and everyone gets excited, then they spend years resolving the details.”

Protium, along with partners Fuel Cell Systems, Enapter, and the University of South Wales, is one of the few clean hydrogen companies that are, today, producing clean hydrogen from the Pioneer One generating facility in Baglan Energy Park, South Wales since March 2023.  

The facility produces up to 40 kg/day which is used in vehicle trials and other small initial hydrogen operations.

Pioneer 2, meanwhile, is expected to be in commercial operation by Q4, 2024 and, via a 2.5 MW containerized NEL PEM Electrolyzer and Haskel compression package, will deliver up to 900 kg/day of clean hydrogen.

The company, which has not received any subsidy via the first Hydrogen Allocation Round (HAR1) mechanism but does aim to bring projects forward to the second round, HAR2, aims to develop 1GW of clean hydrogen production by 2030, or a fifth of the UK’s domestic hydrogen production target.

Proposed UK supply chain ambition, strategic pillars and foundational elements

(Click to enlarge) 

* The 50% local content target is consistent with the North Sea Transition Deal ambition for low carbon energy projects and the CCSA’s localisation target for CCUS projects

Source: Hydrogen UK - Anchoring UK hydrogen supply chains: setting out an industry vision 

Repurposing infrastructure

Veri Energy, launched by North Sea operator Enquest at the end of 2023 as a wholly-owned subsidiary, meanwhile, is working on transforming and repurposing the terminal site at the Sullom Voe Terminal (SVT) in the Shetland Islands.

The SVT is an oil and gas terminal which handles production from oilfields in the North Sea and East Shetland Basin and whose ownership was transferred to Enquest from BP in 2017.

Oil and gas throughput at the terminal today is 90% lower than its peak capacity of one and a half million barrels of oil a day and Veri Energy plans to use the significant existing infrastructure to transform the terminal into one of Europe’s leading clean energy and carbon storage hubs.  

Veri aspires to harness the significant onshore and offshore wind potential to produce multi-gigawatts of hydrogen in the long term.  

“We are already endowed with key pieces of infrastructure and we're not starting from scratch,” says Veri Energy CEO Salman Malik.

The hydrogen project’s first step, supported by the government-backed Net Zero Hydrogen Fund (NZHF) with fund-matching worth £1.7 million, is a 50MW electrolyzer run by onshore wind generation and using the grid as a backup.

Scaling up

Scaling the industry will be the next great challenge, and that requires creating demand and building transport infrastructure.

For a country the size of the UK, a tube trailer capable of moving one ton of compressed hydrogen coupled with distributed sites around the country, will be sufficient to cover small-scale demand, at least at first.

For Protium’s largest projects, such as with AB inBev’s brewery in Samlesbury, the company plans to co-locate hydrogen production to avoid the pitfalls of transporting hydrogen.

For Veri Energy, this is a challenge because the site is far from demand centers, prompting the company to enter talks with local companies and governments about which clean hydrogen product – e-diesel or synthetic aviation fuel, for example – will ultimately be consumed.

“The business case is challenged with hydrogen in its infancy, like solar and wind were 20 years ago, and you do need everybody to work together. You need private capital providers to secure government support to create a viable project,” says Malik.

“Similarly, you need the off takers to recognize that accessing low carbon product is going to have to occur at a premium.”

Protium’s Jackson agrees that whichever projects are being developed in the UK today, there are still many creases to be ironed out and starting small is essential.

“You'll have these small assets initially, like our Pioneer 2, that will help cater to some first mover customers,” he says.

Some of these contracts will be short, as it’s too early for these customers to sign 15-year offtake agreements.

“This is about proving the technology works, getting you comfortable with it, and understanding at a small scale,” says Jackson.

By Paul Day