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UK Hydrogen and the REPowerEU Plan

  • Europe
  • Energy and infrastructure - Hydrogen

14-03-2022

Europe’s dependence on imported natural gas from Russia has been put under the spotlight by Russia’s invasion of Ukraine on 24 February 2022. Given that gas imported from Russia accounts for around 40% of the EU’s gas imports, the EU has been under pressure in recent weeks to consider alternative energy sources, culminating in the publication of the REPowerEU outline plan (the “Plan”) on 8 March 2022. The Plan summarises the EU’s aim to reduce EU demand for Russian gas by two thirds before the end of the year and sets out a roadmap to accelerate the switch to renewable energy to support this. The Plan proposes to quadruple targets for green hydrogen by 2030, and specifically refers to the switch to renewable hydrogen as an energy source. In this briefing, we will discuss the Plan, and whether the UK’s ‘twin-track’ approach (which provides support for both electrolytic (‘green’) and CCUS-enabled (blue’) hydrogen) as set out in the UK Hydrogen Strategy in August 2021 is the correct approach given the Plan’s obvious support for renewable (‘green’) hydrogen.

The Plan proposes a Hydrogen Accelerator to develop infrastructure, storage facilities and ports, and replace demand for Russian gas. It also highlights the importance of  decarbonising industry by accelerating the switch to electrification and renewable hydrogen. Whilst the Plan provides strong support for green hydrogen, it does not solely support green hydrogen – the Plan notes that nuclear-based hydrogen could assist in substituting natural gas, however it does not appear to explicitly refer to blue hydrogen.

The UK’s approach to hydrogen has, so far, provided backing for both blue and green hydrogen. The UK Hydrogen Strategy states that this twin-track approach “sets the UK apart, giving us a competitive advantage and building on our strengths to ensure we can be confident in delivering our 2030 ambition and beyond”. One of the reasons behind the approach to back blue hydrogen appears to be the UK’s oil and gas know-how and infrastructure which can be used for the deployment of CCUS technology – indeed, the UK Hydrogen Strategy envisages that industrial clusters for the early deployment of CCUS technology will be located in coastal locations, with important links to CO2 storage sites such as disused oil and gas fields. Cost-effectiveness is also a key element to the decision by the UK government to support a twin-track approach – there is no getting away from the fact that blue hydrogen is currently significantly cheaper to produce than green hydrogen. However costs of green hydrogen are expected to decrease substantially over time, and the EU’s announcement of support in relation to green hydrogen in the Plan may assist to reduce costs of green hydrogen faster.

The decision as to whether to support blue hydrogen projects on a long-term or transitional basis is a controversial topic – some consider supporting multiple hydrogen production routes to be the most efficient approach to increasing overall production of hydrogen, and others view the continuing support for blue hydrogen as  “gift to the fossil fuel industry”. Whether the energy crisis will trigger a change in the UK approach – whether that be an adjustment to its support for blue hydrogen on a purely transitional basis (as per Germany’s hydrogen strategy) or to remove support for blue hydrogen altogether - is yet to be confirmed. However, one thing is for certain: Europe’s commitment to reduce dependence on Russian oil and gas will require substantial investment in alternative energy sources going forward.

Our team at Eversheds Sutherland continue to monitor and report on how hydrogen develops to help deliver a net zero UK. Keep an eye out for further details of our events and discussions on hydrogen, and feel free to contact us to discuss further.