Hydrogen powers to the fore but is Johnson’s grand plan just hot air?

The UK’s investment in the fuel of the future is a drop in the ocean next to that of global rivals

Hydrogen

The Prime Minister has grand plans for hydrogen power. However, he sought to humanise a vision of a future dependent on energy from the lightest, simplest and most abundant chemical.

“You cook your breakfast using hydrogen power,” said Boris Johnson, going on describe a world with cleaner air because “the trucks and trains, ships and planes are running on hydrogen”.

He spoke of how his “10-point plan will turn the UK into the world’s number one centre for green technology and finance” which will see “water turned into energy with up to £500m of investment in hydrogen”.

Targets included generating 5GW (gigawatts) of low-carbon hydrogen production capacity by 2030 for use in industry, power and homes, with the goal of creating the first town heated solely hydrogen by the same date.

Swapping the UK to hydrogen power is a massive challenge which that will require massive investment, however.

Analysts at Evercore calculate a global transition to hydrogen power will cost $400bn (£301bn) over the coming decade and $2 trillion over the following 20 years.

Britain’s investment in the fuel source – even if it does attract the Government’s hoped for £4bn of private sector capital – hardly holds a candle to what is required.

And it’s not as if it hasn’t been tried before. “Hydrogen has a history,” Evercore’s analysis cautioned. “Sceptics are right to be doubtful about a theme that provided false starts of hope and promise in the Seventies, Nineties, and Noughties.

Hydrogen’s ebbs and flows have usually been driven by not being able to compete with low oil and gas prices, rendering moot its ability to serve as an alternative form of energy.”

But this time it seems different. New technology such as viable fuel cells which turn the gas into electricity and global recognition that climate change has to be tackled have created a new impetus around the gas and its applications, as the world turns away from fossil fuels.

Phil Caldwell, chief executive of West Sussex-based fuel cell developer Ceres Power, is hopeful that Britain can have a place in a hydrogen world.

“Government has made a good start,” he says. “These are concrete policies and targets but it mustn’t be the end of ambition. Now it’s up to them to create the right conditions to attract the private investment that’s needed.”

However, he cautions against thinking the UK has staked a flag in hydrogen territory that other countries have yet to recognise.

“Britain did not invent hydrogen power,” the boss of the Aim-listed company says. “South Korea’s investing more than £40bn in hydrogen and fuel cell technology, Germany’s putting £8bn into hydrogen and other big European nations larger amounts than us. If anything we are behind as a nation.”

CCUS: Carbon capture, utilisation and storage

Caldwell believes the UK can be a player in the hydrogen ecosystem but thinks it might be in specialist areas and not the broad-based dominance Mr Johnson envisages.

Ceres, which has quadrupled in value to £1.4bn in the past year, is a good example, Caldwell says. The company’s cells create electricity from a chemical reaction as gas passes through them generating low harmful emissions, with hydrogen producing only water.

Although Ceres does have low-rate production, it specialism is creating and licensing technology – “like an energy Arm”, says Caldwell, referring to the Cambridge-based chip-maker – allowing it to focus on creation of high-value intellectual property rather than manufacturing.

“Britain is world-class when it comes to developing technology, and that’s where we can be strong in a hydrogen power world,” Caldwell says.

“Government focusing on the UK misses the big picture. Ironically, the rest of the world recognises our technology exists: our fuel cells for home heating are on sale in Japan, we’ve got partnerships and licensing deals with global giants such as Bosch as they buy from us. Government needs to lift its gaze and look globally, not just focus on the UK.”

British company JCB has developed a prototype 20-tonne excavator powered by a hydrogen fuel cell Credit: JCB

But Britain has a close to home advantage when it comes to hydrogen – geology. To understand why, you need to consider how hydrogen can be produced without releasing more CO2 into the atmosphere.

There are two main ways: “green hydrogen”, where the gas is produced using power from renewable energy such as wind farms to electrolyse water and has no emissions, and “blue hydrogen”, where it is extracted from natural gas and the carbon emissions are captured and stored, often in old oilfields.

“Thanks to decommissioning of the North Sea we have the best geology in the world for carbon capture and storage (CCS),” says Eugene McKenna, green hydrogen managing director of FTSE 100 chemicals business Johnson Matthey. “We’re putting back what was taken out and eventually it will turn back into rock.”

These formerly unwanted sites – which other North Sea oil countries have access to – place Britain at the forefront of CCS development (also known as CCUS with ‘utilisation’). Arguably Australia has similar geological advantages, but the sunny climate Down Under makes it ideal for solar-powered green hydrogen, and Norway’s abundant hydro power means it has less of a focus.

Johnson Matthey is ideally placed for the push into hydrogen McKenna says, as the high value electrolysing equipment needed is a speciality product of the company. “We do the science for this in the UK and can export this high-value technology worldwide,” he says. “This is not Californian or Chinese technology, it is British technology that’s wanted worldwide.”

Focusing investment close to home is an opportunity missed in the last renewable energy boom, as nations moved into solar, and particularly in cloudy northern Europe, wind power, according to Marco Alverà, chief executive of Italian energy infrastructure business Snam.

He praises the UK as home to “some of the world’s best energy technology companies”, something he attributes to the country being a “beacon on energy policy, with the most informed parliament and people”.

“The UK, Germany, Italy and Spain drove down the price of renewables because of policies and subsidies to encourage utilities to invest, and the UK was at front of them,” he says. “But the £1 trillion that consumers paid from their energy bills over 15 years in subsidies went mainly to Chinese manufacturers of solar and wind equipment because the capacity wasn’t in Europe.

“I’m a huge advocate for intelligent policy nudges to keep that money in Europe,” Alverà says. He’s putting his money where his mouth is, in a sign of what he calls the “wisdom” of UK energy policy. Snam has taken a £30m stake in Sheffield-based ITM Power, whose electrolysers produce hydrogen from water.

Such nudges could extend beyond the energy sector itself. Steelmaking uses masses of energy but can be powered by hydrogen, though doing so would ramp up production costs.

However, encouraging European steelmakers to make the transition would put them at the mercy of cheap steel from China and Asia. Driving a European transition to hydrogen power could involve trade barriers to protect manufacturers from imports, tying policies around climate change, industry and trade.

Alverà also brushes off worries over protectionism allegations, adding “the US’s actions over the last four years [imposing trade tariffs] have given Europe permission” to act in the way he hopes.

Another factor that could be in the UK’s favour for hydrogen energy is the City’s position as the world’s dominant financial centre. According to Morningstar, $1 trillion of assets are in funds which invest according to environmental, social and governance (ESG) principles, and hydrogen is a prime candidate for that money.

London’s record for funnelling investment could help the UK become a hub for green money flowing into companies looking to exploit hydrogen power.

For all the Prime Minister’s intentions, what is needed now from government is a focus on exactly where the UK can be a leader in hydrogen. This in especially true in light of the small amount of investment government is kicking in compared with other nations, says Robert Bloom, of new energy analysts Delta-EE.

“It is difficult for various industries to understand where the UK government is focusing its hydrogen ambition and which sub-sectors could expect targeted funding and support,” he says. “As a result, this announcement could be seen to be lacking compared to other European countries who have pledged greater investment and committed to green hydrogen.”

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