Hansard

Hydrogen is rapidly emerging as a sustainable solution for the decarbonisation of the economy and a key piece of the energy transition picture. That view is now held in Scotland, in Europe, in south-east Asia and around the world.

On 21 December 2020, we became the first country in the United Kingdom to publish a hydrogen policy statement. The statement is underpinned by independent analysis and sets out how we can make the most of Scotland’s massive potential in this new sector. I am pleased to talk today about hydrogen’s role in decarbonising our energy systems and about our ambition for the future hydrogen economy in Scotland.

Hydrogen has a potentially very important role to play in achieving net zero. We also believe that Scotland’s abundant natural, human and physical resources will support the establishment of a thriving hydrogen sector in Scotland and the emerging global hydrogen market.

That view is supported by the extensive engagement, assessment and analysis in three studies that we have commissioned over the past year: the “Scottish Hydrogen Assessment”, the “Scottish Offshore Wind to Green Hydrogen Opportunity Assessment” and the “Deep Decarbonisation Pathways for Scottish Industries” study. Those key reports have provided a comprehensive evidence base for our hydrogen policy statement.

We are not acting in isolation. The European Union has set a strategic objective of installing at least 6GW of renewable hydrogen electrolysers that will produce up to 1 million tonnes of green hydrogen in the EU by 2024 and 40GW that will produce up to 10 million tonnes of green hydrogen by 2030. The UK Government’s recent 10-point plan for a green industrial revolution included setting a target of 5GW of low-carbon hydrogen production capacity by 2030, and we expect a UK hydrogen strategy to be published in 2021. In 2020, the Government of Germany committed €9 billion of funding to its hydrogen strategy over the next five years, and it was closely followed by the French Government committing €7 billion of funding to deliver France’s hydrogen strategy.

The sixth carbon budget report from the Climate Change Committee suggests that low-carbon hydrogen production will scale up to 90 terawatt hours by 2035. That is nearly a third of the output of the current power sector in the UK.

In our hydrogen policy statement, we set out a vision of Scotland becoming a leading hydrogen nation. We believe that producing clean hydrogen and showing that it can be used to meet challenging energy demands from industry and from the transport and heat sectors will be a key part of the next stage of Scotland’s energy transition pathway. From our assessment, it is clear not just that hydrogen is an energy and emissions reduction opportunity, but that it could also have an important role in generating new economic growth for Scotland by creating new jobs and significant just transition opportunities—for example, in the export of hydrogen and associated technologies.

Our hydrogen policy statement is aligned to the Scottish Government’s climate change plan update, and our climate targets are underpinned by our commitment to a just transition that supports sustainable economic growth and jobs.

Our policy statement confirms our support for the strategic growth of a strong hydrogen economy in Scotland, focusing our efforts on supporting the development of Scotland’s hydrogen production capability to meet our ambition of having at least 5GW of renewable and low-carbon hydrogen production capacity by 2030, which will be capable of producing up to 27 terawatt hours of energy. We will seek to have at least five times that capacity by 2045, which will be 25GW of hydrogen production capacity.

On the scale of our ambition, it is worth noting that our target of an installed capacity of 5GW of hydrogen production by 2030 is the same as the installed capacity target that has been set by Germany, which is clearly a much larger country with a much larger industrial base. We have confidence in setting such a high ambition due to Scotland’s vast resources in onshore and offshore wind and in wave and tidal energy, and we are confident about hydrogen’s potential to unlock more of those renewable resources and improve the competitiveness of hydrogen production in Scotland. Scotland’s company base, skills and assets in the oil and gas, offshore wind and energy systems sectors will add value and bring the transition opportunity that will be a critical part of building Scotland’s hydrogen economy.

We are in a climate emergency, and pace is vital. With that in mind, we have, in addition to existing funding programmes, committed £100 million of the £180 million of new funding in the emerging energy technologies fund to the development of our hydrogen economy over the next five years. That will be implemented through our hydrogen action plan, which is due for publication in 2021.

We believe that both green and blue hydrogen will play increasingly important roles in our energy transition to net zero. It is therefore important that carbon capture and storage systems are established to support the production of blue hydrogen by the mid-2020s.

Our hydrogen policy sets out our continued support for the demonstration, development and deployment of hydrogen. We are committed to exploring how we can drive forward technological progress and advance innovation by unlocking public and private funds for innovation development. We also intend to support demonstration of key hydrogen technologies such as fuel cells and electrolysers, which we will seek to exploit for supply chain development opportunities.

International collaboration will be key to the development of hydrogen markets. In our policy statement, we committed to actively seeking international collaboration in the development of our shared hydrogen economy. The hydrogen action plan will set out how we seek to develop Scotland’s potential to export significant quantities of hydrogen.

Carrying on from the wide-ranging assessment of hydrogen that we undertook in 2020, we continue to explore our hydrogen potential, and I can now announce the commencement of a project to examine marine vessel hydrogen transportation and storage. That collaborative project will reflect the opportunities for hydrogen development and energy transition in our regions and will be jointly funded by the Scottish Government, the Port of Cromarty Firth, Shetland Islands Council, the Oil & Gas Technology Centre, Global Energy Group, ERM and Pale Blue Dot Energy. We expect the study to conclude its report in the summer of this year.

The pace of industry-led hydrogen projects in Scotland is accelerating. I am pleased to inform members that, through its recently launched green hydrogen business, Scottish Power has signed an agreement with Global Energy Group at its Port of Nigg site to work together to identify how green hydrogen could be generated at the site. The project will open a window for us into how hydrogen can be viewed as playing an integral role in our energy and industrial systems.

I recognise that it is crucial that Scotland and Scottish companies benefit fully from our development of hydrogen. Scottish content will be central to the sustainable growth of this new sector, and the development of our supply chain will play a critical role in shaping and defining our approach to the hydrogen action plan. We will support the transition and growth of Scotland’s emerging hydrogen supply chain by embedding it in our new supplier development programme, which is led by my colleague Ivan McKee, and by including the development of skills and manufacturing capacity that can play a significant role in the hydrogen economy both domestically and internationally.

We cannot achieve our hydrogen ambitions alone. As we move forward, we will work closely with industry to design policy and regulatory environments that will enable us to support hydrogen production at scale.

Of course, many of the regulatory and legislative levers that will be required are determined at the UK level. We are therefore committed to closely engaging with the UK Government on the development of a UK-wide policy. We urge it to move quickly and decisively on the development of such a policy and of regulatory frameworks for hydrogen, and to make the important decisions on the future of the gas grid, business models and market mechanisms that will underpin the hydrogen economy. All of that will be important for increasing market certainty and boosting investor and consumer confidence.

Our provision of £6.9 million of funding to the Scottish Gas Networks H100 Fife project has now leveraged a further £18 million of funding from Ofgem. That flagship demonstration project will deliver a first-of-its-kind 100 per cent hydrogen heat network that will supply 300 domestic properties with clean, green hydrogen heating. It will be a critical step towards understanding the role that hydrogen can play in decarbonising heat by using the gas network, and it will demonstrate technology such as hydrogen-enabled boilers.

I re-emphasise the following key points. Scotland has abundant natural resources, and we believe that we have a competitive advantage in the components that are necessary to grow a strong hydrogen economy that will support jobs and gross value added growth and develop new industrial opportunities on a significant scale. Our reputation for excellence in energy, our innovative oil and gas supply chain and our strong onshore and offshore wind sectors will be key to our achieving a just transition to a low-carbon and, ultimately, a net zero age. Both our oil and gas sector and our renewable energy sector will be critical to establishing stable and secure production of affordable large-scale hydrogen power facilities. We believe that hydrogen will play an important role in our transition to a net zero electricity system, directly complementing renewable generation and providing new ways and opportunities to use, transport, integrate and store such energy.

We also believe that the development of a hydrogen economy with a strong export focus represents a substantial economic opportunity for Scotland. Many of our neighbours in northern Europe are looking to Scotland to export to them the hydrogen that they will need for their own decarbonisation journeys, with the rest of the UK also likely to be a significant net importer.

No single fuel or technology is, by itself, the solution to climate change, but hydrogen has the potential to be an important part of a decarbonised energy system, and it represents a significant and valuable export opportunity. We are committed to supporting the emerging hydrogen sector in Scotland while maximising the “new industry” benefits that the production of hydrogen may bring. I look forward to seeing Scotland grasp the opportunities that a hydrogen economy presents to secure a just transition to net zero.