Scottish Hydrogen Assessment
Scottish Hydrogen Assessment
Scottish Hydrogen Assessment
Assessment
December 2020
SCOTTISH HYDROGEN ASSESSMENT - C
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CONTENTS
1 INTRODUCTION 12 6 SCENARIOS 63
AND POLICY CONTEXT 6.1 Creating the scenarios 64
1.1 Net-zero and a hydrogen pathway 13
6.2 Scenario A: Hydrogen Economy 65
1.2 Scottish Hydrogen Assessment 14
6.3 Scenario B: Green Export 67
1.3 Stakeholder Engagement 14
6.4 Scenario C: Focused Hydrogen 69
1.4 Hydrogen in the energy system 16
6.5 The development of hydrogen 71
in each scenario
2 THE GLOBAL PICTURE 18
FOR HYDROGEN 7 ECONOMIC ASSESSMENT 76
2.1 Global action 19 7.1 Overview and purpose 77
2.2 A global commodity market 22 7.2 Key findings 78
5 THE DEVELOPMENT OF 52
HYDROGEN IN SCOTLAND
5.1 Production 53
5.2 Demand 56
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SCOTTISH HYDROGEN ASSESSMENT - S
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ACRONYMS
ACRONYMS, TABLES
AND FIGURES
ADL Alexander Dennis Limited
EV Electric Vehicle
GW Gigawatt
kW Kilowatt
m Million
MW Megawatt
tn Tonne
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S C O T T I S H H Y D R O G E N A S S E S S M E N T - TA B L E S A N D F I G U R E S
TA B L E S A N D F I G U R E S
Figure 15 Cost estimates of blue and green hydrogen production costs out to 2050 38
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S C O T T I S H H Y D R O G E N A S S E S S M E N T - TA B L E S A N D F I G U R E S
Stakeholder responses to ‘how hydrogen production is split between blue and green
Figure 27 53
production methods
Figure 28 Stakeholder responses to ‘extent of hydrogen’s role for personal transport 56
Figure 30 Stakeholder responses to ‘extent of hydrogen’s role within industry (feedstock and heat)’ 59
Figure 48 Number of jobs in provision of domestic and commercial heat by ONS category 92
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EXEC
ECUU
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V ES U
SUMM
MMAA
RYRY
EXECUTIVE
SUMMARY
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S C O T T I S H H Y D R O G E N A S S E S S M E N T - E X E C U T I V E S U M M A RY
PRODUCTION
END USE
DOMESTIC AND
COMMERCIAL 35 TWh -- TWh 6 TWh
H E AT
INDUSTRY AND
19 TWh 11 TWh 7 TWh
ELECTRICITY
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S C O T T I S H H Y D R O G E N A S S E S S M E N T - E X E C U T I V E S U M M A RY
GREEN HYDROGEN PRODUCTION AND Many of the supply chain elements required for blue and
SCOTLAND’S RENEWABLE INDUSTRY green hydrogen production and CCUS already exist in
Scotland’s resources in onshore and offshore wind, wave Scotland’s O&G industry, and will be employed in the
and tidal are vast, hydrogen has potential to unlock delivery of Scotland’s flagship blue hydrogen and CCUS
more of these renewable resources and improve the project: Project Acorn.
competitiveness of Scottish renewables. The evidence
base assessment and stakeholder engagement indicated TRANSPORT
SECTOR
that Scotland could be an exporter of hydrogen to energy
scarce countries in Europe, such as Germany, which has Hydrogen offers significant advantages over electric
declared an intent to import green hydrogen. However, vehicles (EV) in heavy fleet vehicles such as buses, heavy
this would be reliant on Scotland’s ability to produce goods vehicles (HGVs), non-electrified trains and ferries.
hydrogen that is cost competitive in an international Use of hydrogen vehicles in these favourable modes
market. could be encouraged in the short to medium term to drive
In this assessment, production of green hydrogen demand certainty, and to ensure rapid decarbonisation.
for export and domestic use provided the greatest
additionality in terms of GVA and employment, with an BUILDINGS
estimated £19 bn of value-added and nearly 220,000 jobs A N D H E AT I N G
in 2045. The engagement and evidence base suggests
The flexibility and storage potential offered by hydrogen
that the required skills frequently align with those
could be key to addressing inter-seasonal heating demand.
already present in the renewable and offshore industries.
The existing gas distribution network could be repurposed
Capturing more of the green hydrogen production
to hydrogen, potentially easing the transition from natural
value chain, including electrolyser integration or even
gas. However, the evidence base must be developed to
manufacturing upstream would result in greater economic
support longer term decisions on the future for hydrogen
benefits.
in the gas network. If the indicators are positive, the use
However, Scotland has a limited pipeline of green of hydrogen in domestic, commercial and industrial space
hydrogen production projects, and there are gaps in the heating could to play an important role in unlocking blue
indigenous supply chain. Support from Government, both hydrogen production.
in terms of stimulating a market and investing in skills and
supply chain, is needed. INDUSTRY AND
P O W E R G E N E R AT I O N
Public and private sector support for hydrogen is strong, and industr y
is seeking to work closely with gover nment to position Scotland to build
on existing skills and natural resources and secure economic benefits
from the hydrogen economy.
As part of the Hydrogen Assessment Project, a wide range of organisations were consulted on their views on the
development of hydrogen in Scotland. Key emerging themes include:
C L E A R S T R AT E G Y W I T H SPEED OF
PROPOSED AMBITIONS DEPLOYMENT
Stakeholders were clear in their desire for Scotland to Is important if Scotland wants to capture more of the
develop a well-defined policy environment, setting out economic value from hydrogen activities. Scotland could
its proposed ambition for hydrogen, aligned with its become a centre for the production and export of green
workforce and natural capital. This will give a clear signal hydrogen and associated skills, products and services.
of ambition and provide industry and investor confidence. If Scotland is slow to deploy, then there is a risk that
more of those skills and manufacturing will be developed
GOING BEYOND THE PILOT PROJECT quicker elsewhere, leaving Scotland at a disadvantage.
S TA G E A N D I N T O C O M M E R C I A L S C A L E
PROJECTS
To move beyond the small pilot stage and progress to
larger scale commercial projects, industry requires viable
business models that allow for and stimulate private sector
investment. Expediting the implementation of an enduring
fiscal regime will be critical to creating the pipeline of
post demonstration projects.
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S C O T T I S H H Y D R O G E N A S S E S S M E N T - E X E C U T I V E S U M M A RY
Hydrogen has a role to play in all Scotland’s regions, with its application
reflecting the distribution of resources and geography specific
demands. Island and rural communities, industrial clusters and urban
areas are already developing solutions and expertise appropriate to
their natural capital and energy needs.
Hydrogen solutions in Scotland are likely to be region specific, reflecting local resources and demands,
as current Scottish demonstration and development projects show:
These areas may also offer opportunities to become hubs for hydrogen
export to Scotland, UK and Europe, as they link resource to production
with onward distribution. The Orkney Islands are making significant
progress in realising these opportunities and other regions like Shetland
and the Outer Hebrides are following suit.
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1.
INTRODUCTION
AND POLICY
CONTEXT
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SCOTTISH HYDROGEN ASSESSMENT - INTRODUCTION AND POLICY CONTEXT
1 INTRODUCTION AND
POLICY CONTEXT
1 . 1 N E T- Z E R O A N D A H Y D R O G E N P A T H W A Y
Scottish Energy
Strategy (2017) 2
Hydrogen
Policy
Electricity and Gas Statement
Environment Strategy
Network vision
for Scotland (2020) 7
statement (2019) 11
Figure 01: Developing Scottish and UK policy context for hydrogen 6, 7, 8, 9, 10, 11
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SCOTTISH HYDROGEN ASSESSMENT - INTRODUCTION AND POLICY CONTEXT
of those scenarios.
1 . 3 S TA K E H O L D E R
ENGAGEMENT
Committee on
Climate Change
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This engagement was designed to gather thoughts and views on the options for hydrogen
production, transportation and end use in Scotland. This fed into the design and development
of the scenarios, through which these options could be fully explored (see Section 6 for the
scenarios). Engagement was conducted over a number of months and set out in four phases.
Comprehensive survey
Stakeholder survey on the status of hydrogen in
SURVEY
Scotland and how it could be developed in the future.
38 detailed responses
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SCOTTISH HYDROGEN ASSESSMENT - INTRODUCTION AND POLICY CONTEXT
powered a significant amount of Scotland’s Transportation Pipelines, hydrogen delivery vehicles or vessels.
heating and street lighting systems until the Storage Above ground or geological.
discovery of North Sea natural gas.
Including in transport, domestic & commercial heating,
End usage industrial heating & processes and power generation.
More recently, hydrogen has become of These applications can be either fuel cell or direct combustion.
interest as a decarbonisation option as it
emits no carbon dioxide at the point of use. Table 01: Application of hydrogen
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2.
THE GLOBAL
PICTURE FOR
HYDROGEN
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SCOTTISH HYDROGEN ASSESSMENT - THE GLOBAL PICTURE FOR HYDROGEN
facilitate the strategy actions and build Transition alignment Large scale system
an investment pipeline. integration and
Enables renewable energy cooperation
Fuel Cells and Hydrogen development
Joint Undertaking (FCHJU) drives a Requires critical mass in
funding scheme (€1.3 billion (bn)) to Mix of green and blue hydrogen investment
accelerate hydrogen technologies in production.
energy and transport 14 .
Green hydrogen is the priority,
with blue hydrogen needed in
the interim.
( S T R AT E G Y R E L E A S E D
JUNE 2020)
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IDENTIFIED
Targeting exports to Asia. Phase 1 (underway Large scale wind and solar
NOVEMBER 2019)
IDENTIFIED
Focused on transportation. Target of 6.2 m Economic opportunities in
(ROADMAP
fuel cell vehicles (FCV) and 1,200 refuelling automotive manufacturing. Planned rapid increase in
stations by 2040 21 demand, low capability for
Mix of green and blue hydrogen indigenous production.
In 2018 the Ministry of Trade Industry and production.
Energy (MOTIE) announced US$ 22 bn (€18.5
bn*) budget for establishment of a hydrogen
vehicle industry 22
competitiveness of
Olympic village has 6,000 residential units hydrogen technologies
Shift away from nuclear
supplied exclusively by hydrogen, through and competing automotive
following Fukushima disaster
combined heat and power fuel cell. hydrogen markets.
Decarbonisation
The Japanese gover nment have previously
dedicated US$1.5 bn (€1.27 bn*) to hydrogen Automotive manufacturing
technology research and development (R&D). capability
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2.2 A GLOBAL
COMMODITY MARKET “Scotland could make significant profit
from exporting hydrogen to England and
As with all energy resources markets appear the rest of Europe”
through energy imbalance. Countries with
Stakeholder questionnaire opinion
abundant resources relative to demand
have the potential to be net exporters e.g.
Australia, Scotland, and vice versa will be Estimates of the scale of the global market
importers e.g. Germany. Hydrogen could be a vary and will ultimately depend on the level
global energy commodity, acting as an energy of penetration of hydrogen within the energy
carrier, with strong analogies to the existing system. Figure 6 shows a range of predicted
global O&G market. demand level in 2050 globally, in Europe and
in the UK.
For a country to be a successful exporter
of hydrogen, it must be able to produce
and transport the hydrogen to the point
of demand. This must be done in a cost Global
competitive way, competing in a global
market. Access to low cost renewables,
supplies of natural gas, carbon storage Europe
infrastructure, utilisation of existing transport United
Kingdom
infrastructure and proximity to demand, will
all contribute to reducing the cost base. 27,500 2,400 2,251 233 700 53
Scotland is well placed in terms of proximity *Global not to scale Strong ambition Low ambition
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SCOTTISH HYDROGEN ASSESSMENT - THE GLOBAL PICTURE FOR HYDROGEN
KEY
World’s largest hydrogen
Production refuelling station
Transmission/distribution Hydrogen energy 2,000 kilogram per day refuelling HyNet H2 Project
H2@Scale
storage facility station opened in 2019 as the largest Deployment of hydrogen refuelling
End user Exploring the potential for wide-scale
In Mississauga, Ontario in the world infrastructure in South Korea
hydrogen production and utilisation
Multi-vector in the United States across the full energy storage facility
supply chain using hydrogen for power
grid stability and Beijing Hydrogen Winter Olympics
reliability services Built the Yanqing Hydrogen Industry
(operational) Park to drive public transport Japan H2 Mobility (JHyM)
development for the winter Olympics Deployment of hydrogen
refuelling infrastructure in Japan
Hydrogen Energy
California (HECA) Liquefied H2 Supply Chain Project
HECA will turn coal and Demonstration of brown coal gasification and marine
petroleum coke into clean transportation of liquefied hydrogen from Australia to
hydrogen with CCUS Japan and unloading of liquefied hydrogen in Japan.
technology. Due to be operational in 2021.
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End user
NortH2 Project
Multi-vector Gigastack Hydrogen Green hydrogen production via 10MW
Countries more likely to Electrolyser wind farm (in development)
be net importers of hydrogen Feasibility study for
(based on their estimated potential green hydrogen
solar and wind resources) production Delfzijl Electrolyser Plant
Feasibility study for green hydrogen
production of 300 tons a year
Elmsland Power-to-Gas Plant
Wind power used to produce
Magnum H2 Power Plant hydrogen gas
Feasibility study of conversion of one
unit of a natural gas power station to
HyPER 100% hydrogen
Feasibility study of bulk
hydrogen production at
Cranfield University
HYBRIT
Replacing coking coal used in ore-based
steelmaking, with fossil-free electricity and
hydrogen
HyDeploy
Pilot project blending H2
into domestic natural gas
networks.
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Indigenous
renewable SUPPLY
Limited natural
supply
resources to
already lower
expand
than current
demand
DEMAND
NET IMPORTER
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Current
renewable Plans to be
energy demand one of the top
does not three hydrogen
outweigh supply exporters to
(pre-hydrogen asian markets
production)
Significant
DEMAND Hydrogen
natural
strategy focus
resources
on green
(wind and
hydrogen
solar)
SUPPLY
NET EXPORTER
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3.
A SCOTTISH
HYDROGEN
ECONOMY
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3 A SCOTTISH
HYDROGEN ECONOMY
GREEN DIVERSITY
HYDROGEN AND
RESILIENCE
BLUE
ENERGY
HYDROGEN
SKILLS
AND CCUS
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3.2 SCOTLAND’S
EXPERIENCE “The supply chain in Scotland which
currently services heavy industry and the
There is rapid acceleration of a hydrogen energy sector should be well positioned to
economy globally, with several nations support progress in the hydrogen industry.
developing and delivering on hydrogen These supply chain lines have shown a
strategies that match their existing strengths prior ability to reshape themselves to
and natural capital. Scotland has already support new industries
made significant progress on the global (e.g. offshore wind), although as ever
stage in creating the foundations of a governmental support for this transition
transition, with a number of world leading and a focus on encouraging local content
demonstration and development projects. In will be key”
order to maximise the captured economic
Stakeholder questionnaire opinion
benefits, Scotland will need to accelerate
support and commitment in areas that match
Scotland’s strengths.
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Glasgow hydrogen
01 Project Acor n 20 27
transport project
Glasgow hydrogen 32
22
03 Surf ‘n’ Turf bus project
17 26
24 02 15
23 HyStorPor
04 Dolphyn ERM 03 12
13
Caledonian Clean 24 BIG HIT
05
Energy Project
33
25 Methilltoune 38
06 Chapelcross 18
Promoting Unst 36
08 H100 27 01
Renewable Energy
10
Grangemouth to The Hydrogen
28 37 21
09 Granton future local Office
11 14 04
transmission system
Levenmouth 35
29 Community Energy
10 Aberdeen Vision 16
Project
100% Green
14 HyTrEc 33
Hydrogen Hub
Hydrogen 06
15 HyDIME 34
Accelerator
16 SWIFTH2 Aberdeen
35
Hydrogen Hub
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S C O T T I S H H Y D R O G E N A S S E S S M E N T -- A AS C
SCOO
T T ITSI H
S HH H
YYDD
RROO
GGEN
E NE C
ECOO
NNOO
MMYY
HYDROGEN COAST
CASE STUDY
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4.
HYDROGEN
TECHOLOGY
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4 HYDROGEN
TECHOLOGY
USER
Whether consumers accept and want to use hydrogen, will be key to how much
REQUIREMENTS, it is used in the economy. One key advantage of hydrogen is that, as a gas,
CONSUMER it often gives a similar user experience to the hydrocarbons solutions it will
CHOICE AND displace. For example, hydrogen fuel cell vehicle refuelling is more similar to
CONSUMER diesel/petrol vehicles, than electrical vehicles that require much longer charging
durations.
A C C E P TA N C E
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The investment case for any infrastructure project considers lifecycle cost
(CapEx and OpEx), revenue/income, pay back periods and market risk.
INVESTMENT Currently decarbonisation solutions, including hydrogen, are generally not cost
CASE competitive with hydrocarbon alter natives. Until the market matures and cost
reductions are realised market support/subsidy is likely to be critical to support
hydrogen business models.
A Just Transition is not just about focusing on delivery of the lowest cost
decarbonisation solution. It also needs consideration of the creation of jobs
and economic benefits associated with the transition. Net-zero will result in
SOCIO- a major shift away from a carbon based economy into a new green economy,
ECONOMIC requiring different skills and economic activities. Early movers in hydrogen
BENEFIT are likely to capture more economic benefits by securing these new activities.
However, it is important to be realistic and focused on where economic value
can be captured, considering indigenous strength relative to global capability
and the scale of the domestic industry.
Geography has a key role to play in how any hydrogen economy will develop,
and it is possible that solutions will be region and location specific. The cost
of hydrogen at point of demand depends on the local cost base of production,
the way in which it is distributed and stored, as well as the cost base of the
energy source it is displacing. Rural and island locations often have high fuel
GEOGRAPHY
costs and local constrained renewable production which provide economically
favourable conditions for hydrogen as a solution. Urban centres are generally
not co-located next to production, but do have more developed existing
infrastructure, and larger volumes of demand to stimulate hydrogen production
at scale.
Table 03: Factors influencing technology deployment in a net-zero energy system (continued)
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SCOTTISH HYDROGEN ASSESSMENT - HYDROGEN TECHNOLOGY
4
£/kg H 2
0
2020 2025 2030 2035 2040 2045 2050
Blue hydrogen costs are essentially the It will also need to be in proximity to CCUS
wholesale natural gas price plus a production facilities, or at least be connected to any
‘premium’. This covers the efficiency loss future CCUS networks.
(i.e. the additional kilowatt hour (kWh)
Green hydrogen costs are also mostly
of natural gas required for each kWh of
determined by the feedstock costs, in this
hydrogen produced) the cost of transporting
case renewable electricity. Costs also
and storing the carbon and the operational
include the capital expenditure CapEx and
and capital costs of the plant itself. Blue costs
operational expenditure OpEx and efficiency
are expected to increase out to 2050 as the
of the electrolyser system.
cost of natural gas rises and potential carbon
taxes are introduced. The reducing cost of renewable electricity,
increased scale of electrolyser manufacture
To limit the need to construct additional
and improved efficiencies mean that the cost
natural gas pipelines, blue hydrogen
of green hydrogen is expected to reduce
production will need to be near large natural
substantially out to 2050.
gas sources or import points.
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£/kg H 2
OpEx for 2035 results in a hydrogen cost of
over £3/kilogram (kg), with the feedstock £1.50
H Y D R O G E N T R A N S P O RTAT I O N
AND STORAGE COSTS
Scotland’s gas transmission and distribution system could
Transmission and distribution be converted to accept hydrogen, either as a blend or as
full hydrogen networks. Larger interconnector pipelines
Production costs are only part of the story, could be used to connect Scotland to Europe.
the costs of transporting the hydrogen from
production to end usage application is
important for determining the overall costs.
Currently, most hydrogen production is co- Hydrogen can also be transported using road or rail
either as a gas, liquid or as ammonia and all are mature
located with end use. In the future this will technologies in use today. However, due to its low
not be practical for all end uses. volumetric energy density there is less energy moved per
vehicle, requiring more delivery vehicles on the road to
It is expected that transmission and meet demand.
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SCOTTISH HYDROGEN ASSESSMENT - HYDROGEN TECHNOLOGY
The potential to use the existing gas network COMPRESSED GAS IN PIPELINE
TRANSMISSION SYSTEMS
is one of the main attractions for using
Allows for the storage of daily and weekly variations
hydrogen in Scotland and the UK, which in the gas network. Linepacking is not as effective for
has a relatively well-developed gas network hydrogen as it is for natural gas due to hydrogen’s lower
density.
compared to many other countries.
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4 . 3 H Y D R O G E N S U P P LY
AND DEMAND BALANCE
1
SCOTLAND’S ENERGY DEMAND
11
ITY
IC
Scotland’s current energy demand equates to TR Wh
T
approximately 160 TWh38, circa 10% of the
EC
38
EL
2
UK’s total energy demand of 1,640 TWh39. 10
ENERGY
The Scottish Energy Strategy40 estimates that
83 TWH
9
DEMAND
H E AT
8
total energy demand by 2050 will decrease by
TRA
160TWH
5-28%, to 110 TWh – 148 TWh40.
NS W
7
39
O 3
P
RT
T
A breakdown of Scotland’s energy demand h
1. Heat
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SCOTTISH HYDROGEN ASSESSMENT - HYDROGEN TECHNOLOGY
Scotland has the potential to produce significant quantities of both green and blue hydrogen. An
ambitious view of Scotland in the next 20 years could see the country becoming an exporter of
hydrogen to the rest of Europe. However, this is dependent on market conditions and ability to
realise cost reductions.
A blue hydrogen production plant rated at 1 GW will produce significantly more than a 1 GW
green hydrogen production plant. Electrolysers quote their maximum energy capacity at the
input of the electrolyer and SMR/ATR quote a value at the output of the SMR/ATR.
A 1 GW blue hydrogen production facility operating with a capacity factor of 86% and a
conversion efficiency of 80% would produce around 7.5 TWh (225,000 tn) of hydrogen in a
year. This requires around 9.75 TWh of natural gas.
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SCOTTISH HYDROGEN ASSESSMENT - HYDROGEN TECHNOLOGY
Renewable energy potential Figure 21: Location of Scotland’s renewable resources 73, 74, 75
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Hydrogen may help unlock renewable Figure 21: Location of Scotland’s renewable resources 73, 74, 75
(continued)
energy resources that previously were not
economically viable by offering a more
diverse route to market and alternative
revenue streams, by better use of existing
infrastructure, and by separating production
locations from demand locations.
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Green hydrogen plant potential The rate of growth of the green hydrogen
production market, is highly influenced by
Green hydrogen plant/electrolyser build out
the strength and consistency of the market
rates are likely to be the main constraint for
support. The UK offshore wind market grew
scale up of green hydrogen production.
from sub 100 MW projects around the turn
There are practical constraints in how quickly of the century, to installing approximately
a market is likely to scale up, due to supply 800 MW per year in cumulative capacity in
chain capacity constraints and investment just over a decade50. This was enabled by
market confidence. In order to secure relatively stable market support regimes.
investment in multi GW projects, the supply
Currently the global electrolyser market is
chain will need to ramp up capacity, and
relatively small and the largest electrolyser
investors will need to be comfortable with the
systems that are being built are around 10
technology and market risks. These are likely
MW scale. Scotland has a modest pipeline
to progress in parallel, if a market demand is
of identified green hydrogen production
established, then secured orders will allow
projects. Figure 22 shows how the potential
cost reductions in technology to be achieved,
green hydrogen production capacity could be
investors will become more comfortable with
built up around Scotland.
risk and the projects can grow in scale.
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SCOTTISH HYDROGEN ASSESSMENT - HYDROGEN TECHNOLOGY
There are a number of factors that potentially Natural gas is the feedstock of blue hydrogen
limit the growth of blue hydrogen production production and so securing a supply is critical
in Scotland. Similar to green production, to investment in blue hydrogen production.
access to feedstock, in this case natural
Scotland plays a key role in the supply of
gas, and practical build out rates of blue
natural gas to the wider UK system, both
hydrogen production plant are key. Moreover,
from its indigenous production, but also
matching supply to demand, investment
as an importer from the wider North Sea
periods, compatibility with carbon targets and
gas network. The total flow of gas through
competition with green hydrogen production
St Fergus, both imports and indigenous,
have an impact.
varies on an annual basis, and in 2019 was
While increasing blue energy production approximately 240 TWh, almost four times
will create an increasing reliance on natural Scotland’s current natural gas demand.
gas imports, this is not considered to be a
However, the UK Continental Shelf (UKCS)
constraint. It is considered more likely that
is an ageing basin and the total production
the scale up of supply will be matched to
of natural gas is in decline. Predicting the
meet indigenous demand, but not an export
remaining economically viable reserves in the
market. This will ultimately be curtailed
North Sea is challenging. It is possible that
when green hydrogen cost reductions mean
a hydrogen market, and more integration of
the price of green drops below the price of
offshore renewables with O&G assets, would
blue (given that the latter is not zero carbon).
increase the economic viability of reserves
The most ambitious scenarios in this and slow the decline, thereby increasing
assessment assume that Scotland could overall production. The UK Government’s
credibly reach an installed capacity of 200 ‘Maximising Economic Recovery’ strategy52
MW by 2025, 2 GW by 2032 and 5 GW by seeks to slow the decline. However, Oil &
2045. Gas UK predict that by 2045, UK production
will be approximately 30% of 2020
production53.
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SCOTTISH HYDROGEN ASSESSMENT - HYDROGEN TECHNOLOGY
Scotland’s universities have long played The newly launched Hydrogen Accelerator
a role in supporting the national energy will seek to draw on collaborations between
industry. Research and development universities, public sector and industry
(R&D) conducted in universities has a key to support the early development of
role in developing innovative solutions technologies and other hydrogen solutions
and enabling technology development. in the transport sector59. Figure 24 shows
Scotland’s academic institutions are currently Scotland’s key academic skills and strengths
conducting some world leading academic in the hydrogen sector. More detail on this is
work on hydrogen, such as HyStorPor58. available in Appendix A2.3.
This research is funded from a wide range of
Scottish, UK and European funds.
TECHNOLOGY READINESS LEVEL
Economic Modelling
Policy Development
Skills Development
Hydrogen Demand
Storage
UNIVERSITY HIGHLIGHTS
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SCOTTISH HYDROGEN ASSESSMENT - HYDROGEN TECHNOLOGY
Figure 25 and Figure 26 provide a summary Scotland could benefit from a strategic
of some of the key funding opportunities and focus on where interventions in supporting
partnerships for hydrogen and where on the innovation should be focused to best leverage
innovation spectrum these are targeted. benefits across the hydrogen value chain.
Despite the current focus, there is no Engagement with industry suggested a desire
overarching organisation that is co-ordinating to create an organisation which would co-
the Scottish or UK research and innovation ordinate innovation in a similar way to the
efforts focused on hydrogen. There are role of the Catapults, Oil and Gas Technology
particular challenges in bringing together Centre (OGTC), and H2FC Supergen. KEY
elements of funding that can support end Multi-vector
to end projects that include production,
distribution and demand. Targeting Transport
innovation funding on areas that align with
Scotland’s skills and supply chain can help
capture more economic benefits. TECHNOLOGY READINESS LEVEL
Full scale
Early stage R&D Early small scale demonstration
e.g. lab scale Demonstration and commercial
roll out
Organisations that only support direct
hydrogen projects highlighted green HIGHLIGHTS 1 2 3 4 5 6 7 8 9
SCOTLAND
DeepW ind
NECCUS
49
SCOTTISH HYDROGEN ASSESSMENT - HYDROGEN TECHNOLOGY
Full scale
Early stage R&D Early small scale demonstration
e.g. lab scale Demonstration and commercial
roll out
Organisations that only support direct
hydrogen projects highlighted green HIGHLIGHTS 1 2 3 4 5 6 7 8 9
UNITED KINGDOM
Innovation Catapults
O R G A N I S AT I O N
50
SCOTTISH HYDROGEN ASSESSMENT - HYDROGEN TECHNOLOGY
Full scale
Early stage R&D Early small scale demonstration
e.g. lab scale Demonstration and commercial
roll out
Organisations that only support direct
hydrogen projects highlighted green HIGHLIGHTS 1 2 3 4 5 6 7 8 9
O R G A N I S AT I O N
EUROPE
Figure 26: Key funding and partnership opportunities across UK and Europe
KEY
Multi-vector
Industrial
Heat
Electricity
Transport
51
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ININ
S CSOCTOLTALNADN D
5.
THE
DEVELOPMENT
OF HYDROGEN
IN SCOTLAND
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SCOTTISH HYDROGEN ASSESSMENT - THE DEVELOPMENT OF HYDROGEN IN SCOTLAND
5 THE DEVELOPMENT OF
HYDROGEN IN SCOTLAND
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54
SCOTTISH HYDROGEN ASSESSMENT - THE DEVELOPMENT OF HYDROGEN IN SCOTLAND
BLUE HYDROGEN
“If we are living through a climate crisis
It is thought that Scotland has the skills
we should be forgetting completely about
and infrastructure, both in gas supply and
blue and focussing on green”
potential carbon storage facilities, to enable
large scale blue production. However, “With the right support, by 2030 bulk
stakeholders were divided on the role of blue hydrogen could be being produced at
hydrogen production in Scotland with only scale, with a key role for both blue and
around half the stakeholders interviewed green hydrogen. By 2045 the role of
saying that blue production should play a blue hydrogen would be expected to be
significant role. eclipsed by green”
Stakeholder questionnaire opinion
If blue hydrogen is to be produced, most
literature and stakeholders consider that it
will be a transition fuel in the medium term.
Blue hydrogen could supply relatively low Another relevant factor raised by
cost hydrogen, in the large scales needed stakeholders is the purity of hydrogen. The
to enable a hydrogen economy before green production process would result in
eventually being phased out in favour of high purity hydrogen of +99.9% that can
green. However, a key uncertainty is when be used in hydrogen fuel cells, particularly
that transition will happen. in transport applications. Blue hydrogen
production gives lower purity, ~98% which
Given the scale needed for blue production can be used in combustion applications,
and the investment life-time of the assets, boilers, cooker, industrial heating etc., but
it is thought that if blue hydrogen facilities would need to be cleaned for use in fuel
were to be built in the next decade or so they cells. It was considered that this could give
would likely still be operational in 2045, rise to different grades of hydrogen, high
with the phasing out in favour of green purity green hydrogen and lower purity blue
production happening later. If blue hydrogen hydrogen which may have different markets
facilities were required to close by 2045, and different prices.
before the end of their asset life, the unit
cost of hydrogen would increase. Investors
would need to recoup the significant upfront
capital investment over a shorter period,
unless a form of Government assistance or
subsidy was provided. If this progressed, the
carbon that is emitted from blue production
would need to be offset in other parts of the
energy system, for net-zero in 2045 to be
achieved. It was thought that this offsetting
could potentially be achieved by having a
percentage of biogas within the methane
stream.
55
SCOTTISH HYDROGEN ASSESSMENT - THE DEVELOPMENT OF HYDROGEN IN SCOTLAND
5.2 DEMAND
6
1
TRANSPORT 6.6%
13.3%
MEDIUM
sector. Significant commitments are being
made within Scotland on both policy and PERSONAL
LOW
T R A N S P O RT
implementation of hydrogen in transport.
The Automotive Industry Advisory Group 3
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57
SCOTTISH HYDROGEN ASSESSMENT - THE DEVELOPMENT OF HYDROGEN IN SCOTLAND
6
A potential regional approach to using
2
9.4% 12.5%
hydrogen for domestic and commercial
heating was discussed, in which case some
LOW
areas would keep a gas network and use
hydrogen, whereas others would switch to
electrification with heat pumps, and district
H
HIG
3
5
DOMESTIC 18.8% heating may provide other options. The areas
28.1%
H E AT I N G where hydrogen would be used would be
where hydrogen can most easily be produced
and/or stored or, where there were also large
M
IU
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SCOTTISH HYDROGEN ASSESSMENT - THE DEVELOPMENT OF HYDROGEN IN SCOTLAND
FEEDSTOCK
DIUM
5
A N D H E AT
“Blending hydrogen into the gas networks 36.6%
ME
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SCOTTISH HYDROGEN ASSESSMENT - THE DEVELOPMENT OF HYDROGEN IN SCOTLAND
Many stakeholders thought that using A number of studies and projects have
hydrogen in industry and/or within industrial explored the potential for hydrogen in
clusters could act as a demand baseload, power generation, replacing fossil fuels such
enabling hydrogen production at scale which as natural gas, in thermal generation68–70.
could then enable wider hydrogen usage. However, most stakeholders felt that
hydrogen was only likely to play a limited
‘peaking’ role in power generation in
GRANGEMOUTH CASE STUDY Scotland helping to balance renewable
generation.
Grangemouth is an industrial cluster and
refinery that represents a potential high
demand for hydrogen. It currently produces “Large industrial demands for heat in
its own ‘grey’ hydrogen through steam processing could be supplied by hydrogen
methane reforming and could be encouraged gas, as these are likely… to have close
to switch to green or blue hydrogen. access to the existing gas network (which
Numerous stakeholders highlighted the by 2045 could be 100% hydrogen based).
potential of Grangemouth for a transition Distilling tends to be in more rural areas
into low carbon production of hydrogen. and therefore not likely to be able to
access to the gas network, but could use
locally generated hydrogen from local
renewable energy sources which could
create a significant demand/market for
It was also mentioned that smaller industrial
community owned energy assets”
users, outside large industrial clusters, such
Stakeholder questionnaire opinion
as food and drink production, could use
hydrogen. There may be opportunities for
co-location of small scale green hydrogen
production particularly in rural or island “Hydrogen use within industry to deliver
areas. As an example the whisky and high-grade heat is likely to represent a
distillery industry was mentioned by some very important role, since power cannot
stakeholders as a potential opportunity for efficiently meet this demand. On the
decarbonisation with hydrogen. Distillery power generation side, hydrogen could
sites are often remote and not connected to replace gas peakers to meet spikes in
the gas distribution network. electricity demand only. Otherwise most
Although there seems to be a good case electricity consumption will be met from a
for using hydrogen in industry to replace combination of renewables”
natural gas, there are potential alternatives. Stakeholder questionnaire opinion
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SCOTTISH HYDROGEN ASSESSMENT - THE DEVELOPMENT OF HYDROGEN IN SCOTLAND
20%
ME
3
take time to develop and that a domestic
H
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SCOTTISH HYDROGEN ASSESSMENT - THE DEVELOPMENT OF HYDROGEN IN SCOTLAND
Given the diverse and often competing views including factors described above, it is challenging
to accurately predict which applications will transition to hydrogen in the short, medium and
long term. From the literature and the stakeholder engagements a picture of overall themes or
options are emerging.
Where hydrogen is already Where it could be used if it Where hydrogen is less likely
used or is highly likely to is decided that it is the best to be used given the other
be used given the lack of decarbonisation option but more alter native decarbonisation
alter natives. work is required to understand options and is probably more
the appropriate solution for the likely to play a minor role.
application considering location
specific factors.
Domestic and
Power
Existing H2 uses commercial
generation
heating
In the stakeholder engagement, a regional • Large scale green using offshore wind
split in how hydrogen is used and produced that connects to some form of network;
was also discussed. In areas where hydrogen and
can be more easily produced, it could be • Blue hydrogen, which would be large
used across different sectors giving rise to scale and supply a hydrogen network.
local hydrogen networks. In other areas
hydrogen would be used less, with alternative
Which production options emerge will
decarbonisation methods, primarily
depend on the scale and type of demands.
electrification, used in others.
These different options give rise to many
There are three broad options for the supply
ways that hydrogen could develop in
of hydrogen:
Scotland out to 2045. These were used to
• Small scale green production using local form potential scenarios, which is discussed
renewable energy and co-located or very in the next section.
near to demand;
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SCENARIOS
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SCOTTISH HYDROGEN ASSESSMENT - SCENARIOS
6 SCENARIOS
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SCOTTISH HYDROGEN ASSESSMENT - SCENARIOS
35 TWh 17 TWh
POWER
39 TWh ELECTROLYSIS A full gas network operates as TRANSPORT GENERATION
today with natural gas replaced
by hydrogen.
46 TWh
CCUS
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SCOTTISH HYDROGEN ASSESSMENT - SCENARIOS
Hydrogen is seen as one of the main ways that Scotland can reach its net-zero target.
It is therefore used extensively throughout the economy.
Graham from Glasgow wakes up on a chilly winter’s day at 7am, his house is warm from
the hydrogen boiler, this is supplied via a connection to the national grid, which turned on
automatically at 6am. After taking a shower with water heated from the same boiler, he catches
a hydrogen powered bus to his office work in central Glasgow, the office is heated by a large
hydrogen boiler also connected to the national grid.
Sandra in Stornoway also wakes up at 7am, her house and hot water have also been heated by
her hydrogen boiler which is supplied by her local gas grid, using hydrogen produced from
local renewable sources. She drives her EV to work at the distillery, which uses locally sourced
hydrogen for all its energy needs.
Investment requirement
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SCOTTISH HYDROGEN ASSESSMENT - SCENARIOS
POWER INDUSTRIAL
5 GW 32 GW GENERATION HEAT AND
PROCESSES
2 TWh 9 TWh
94 TWh
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SCOTTISH HYDROGEN ASSESSMENT - SCENARIOS
Hydrogen is produced to harness much of Scotland’s renewable energy, becoming a major centre
of green hydrogen production in Europe. In Scotland, hydrogen is most used in the transport
sector, used across all vehicle types.
Graham from Glasgow wakes up on a chilly winter’s morning at 7am, his house has been kept
at a constant temperature by an electric air source heat pump, he takes a shower with water
heated from a small electric boiler. He catches a hydrogen powered bus to his office work in
central Glasgow, the office is connected to a district heating network which has a variety of heat
sources.
Sandra in Stornoway also wakes up at 7am, her house and hot water have been heated by a
ground source heat pump and an electric boiler. She drives her hydrogen FCV to work, stopping
on the way to refuel at the hydrogen refuelling station, which creates its own hydrogen using a
local wind farm. She works at the nearby distillery, which uses locally sourced hydrogen for all
its energy needs.
68
SCOTTISH HYDROGEN ASSESSMENT - SCENARIOS
STORAGE
7 TWh 2 TWh
69
SCOTTISH HYDROGEN ASSESSMENT - SCENARIOS
Hydrogen plays a supportive role in achieving net-zero, being used to decarbonise sectors
and areas where it could have the biggest impact. The production and use of hydrogen is
regionalised, with hydrogen largely produced and then used locally.
Graham from Glasgow wakes up on a chilly winter’s day at 7am his house has been kept at a
constant temperature by the electric air source heat pump, he takes a shower with water heated
from his electric boiler. He catches an electric bus to his office work in central Glasgow, the
office is heated via a connection to a large district heat network.
Sandra in Stornoway also wakes up at 7am, her house and hot water have been heated by her
hydrogen boiler, supplied from the local gas grid. She drives her EV to work at the distillery,
which uses locally sourced hydrogen for all its energy needs.
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SCOTTISH HYDROGEN ASSESSMENT - SCENARIOS
0.5
Each scenario examines hydrogen’s role in 1.40
the Scottish energy economy by 2045, the
year that net-zero needs to be achieved in 1.20
0.9
SHORT TERM - 2025 0.40
0.6 0.2
By 2025 hydrogen will only be a limited part 0.20 0.4 0.4
of the energy economy in all scenarios, with 0.2
0
each scenario showing a different ambition
Demand Supply Demand Supply Demand Supply
for the amounts of hydrogen that could be
A: Hydrogen B: Green C: Focused
used
Economy Export Hydrogen
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SCOTTISH HYDROGEN ASSESSMENT - SCENARIOS
A. HYDROGEN C. FOCUSED
B. GREEN EXPORT
ECONOMY HYDROGEN
Blue Acor n facility in north east No blue hydrogen in this There is no blue hydrogen
hydrogen provides the majority of scenario. at this stage in this scenario
production production supplying 1.5 TWh as the low level of hydrogen
of hydrogen from a 200 MW demand does not warrant
plant. a blue hydrogen production
facility.
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SCOTTISH HYDROGEN ASSESSMENT - SCENARIOS
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SCOTTISH HYDROGEN ASSESSMENT - SCENARIOS
A. HYDROGEN C. FOCUSED
B. GREEN EXPORT
ECONOMY HYDROGEN
Blue The Acor n facility in the north No blue hydrogen in this A small scale blue hydrogen
hydrogen east has expanded and an scenario. production facility has come
production additional facility producing online to supply the local
blue hydrogen is operating network in the north east.
around the Grangemouth Total of 400 MW capacity
industrial cluster. Total of 2 supplying 3 TWh of hydrogen.
GW of capacity supplying 17
TWh of hydrogen.
Expansion in size and number Expansion in size and number Expansion in size and scale
of electrolysers, 2 GW of of electrolysis sites around 4 of onshore renewables, 2
onshore renewable energy GW of onshore wind capacity GW of capacity is used to
capacity is used to make is used to produce hydrogen. supply around 5 TWh of green
hydrogen. hydrogen.
Green
Large scale offshore
hydrogen
Large scale production hydrogen production from There is no large scale
production
offshore has started to come dedicated wind has started to offshore in this scenario.
online reaching around come online reaching 3 GW of
1 GW of capacity. This capacity and accounting for
hydrogen is connected to the around half of all production.
transmission network and/ Around 19 TWh of green
or directly to large demand hydrogen is supplied in total.
centres. In total there is
around 8 TWh of green
hydrogen produced.
Further increase in use across Significant increase in Increase in fleet vehicle usage
Transport fleet transport with more hydrogen use in fleet in areas where hydrogen is
demand hydrogen buses and other vehicles. Also, significant being produced – east coast
public sector fleet vehicles. uptake in personal hydrogen as well as Island and rural
Hydrogen also increasingly FCVs, driven by ban on petrol locations. A total transport
used in commercial fleets. and diesel vehicles in 2032. demand is around 2 TWh.
A total transport demand is A total transport demand is
around 3 TWh. around 5 TWh.
Increase in blending of Hydrogen is not used in Increase in blending into
hydrogen into the gas domestic or commercial the distribution network and
Domestic & network, with up to 20%. heating in this scenario. Many some limited conversion of
commercial buildings are converted to the regional network in the
heating Some areas of the distribution electrification, though the gas north east and the small local
demand network have been converted network is still running at this ‘off grid’ networks in island or
to 100% hydrogen, led by stage. rural areas. For example, the
areas close to hydrogen self-contained gas network
production such as the in Stor noway. Domestic and
east coast and independent Commercial demand totals
networks. Domestic and around 3 TWh.
Commercial demand totals
around 10 TWh.
Increased blend of hydrogen Some conversion of large Increased blend of hydrogen
in existing industrial gas scale industrial processes in existing industrial gas use
use, conversion of some using green hydrogen directly and some limited conversion
industrial processes to 100% connected to a new hydrogen of small scale industrial
Industrial
hydrogen. Some use de-blend network. processes to hydrogen,
demand
hydrogen from the network particularly in north east and
and some direct connection Limited number of small island or rural areas. A total
of large industrial usage to scale industry, in island or of 2 TWh is used in industry
a hydrogen source. A total rural areas using co-located with a further 1 TWh in power
of around 6TWh is used in onshore production. A total generation.
industry and a further 1TWh of around 4 TWh is used in
in power generation. industry with a further 1 TWh
used in power generation.
Hydrogen Scotland produces more than High volumes of hydrogen No export of hydrogen.
export it needs and so becomes a starting to be exported to
net exporter of Hydrogen to the rest of the UK and wider
the rest of the UK. Around 4 Europe. A total of around 10
TWh is produced in Scotland TWh of hydrogen is exported
and used elsewhere in the UK. outside of Scotland.
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SCOTTISH HYDROGEN ASSESSMENT - SCENARIOS
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CIC
A SASSESSESSMSEMNETN T
7.
ECONOMIC
ASSESSMENT
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SCOTTISH HYDROGEN ASSESSMENT - ECONOMIC ASSESSMENT
7 ECONOMIC
ASSESSMENT
Manufacturing
System operation undertaken by
Manufacturing takes Hydrogen sold for
takes place in Scottish businesses,
place in Scotland export
Scotland regardless of
location
77
SCOTTISH HYDROGEN ASSESSMENT - ECONOMIC ASSESSMENT
78
SCOTTISH HYDROGEN ASSESSMENT - ECONOMIC ASSESSMENT
£bn
15.0
value and export potential (see Figure
40). Green Export also delivers the most
employment with more than 300,000 jobs 10.0
either retained or created (see Figure 41).
6.1 5.7
5.3
By contrast, in Hydrogen Economy the more 5.0
2.5
widespread use of hydrogen domestically
0.6 0.7 0.3
such as in heat and transport ensures that this 0
scenario also makes a significant contribution 2025 2032 2045 2025 2032 2045 2025 2032 2045
in terms of GVA generating £16 bn and
Scenario A: Scenario B: Scenario C:
177,000 jobs created. The broader use of Hydrogen Economy Green Export Focused Hydrogen
hydrogen domestically ensures that value-
added and jobs are more evenly distributed Figure 40: Total Scottish GVA in each scenario (£bn)
across sectors in Hydrogen Economy
relative to Scenario B.
350,000
200,000
177,000
150,000
100,000
81,000
64,000 68,000
50,000
31,000
8,000 10,000 4,000
0
2025 2032 2045 2025 2032 2045 2025 2032 2045
79
SCOTTISH HYDROGEN ASSESSMENT - ECONOMIC ASSESSMENT
(£bn)
sector is estimated at £16 bn73 while
£bn
15.0
GVA
the electricity and gas supply sector
represented around £6 bn GVA74. 10.0
• Transport, storage and communication
GVA is around £12bn74. 5.0
300,000
250,000
Number of jobs
200,000
150,000
100,000
50,000
0
2025 2032 2045 2025 2032 2045 2025 2032 2045
Figure 43: Number of jobs by broad economic activity for each scenario
80
SCOTTISH HYDROGEN ASSESSMENT - ECONOMIC ASSESSMENT
PRODUCTION
Onshore Green
Offshore Green
Blue
Transmission
Distribution
HRS
TRANSPORT
Buses
HGV
Trains
Water transport
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SCOTTISH HYDROGEN ASSESSMENT - ECONOMIC ASSESSMENT
Figure 44 indicates locations around Scotland where value creating activities will likely be
undertaken; these vary somewhat according to the scenario being considered. Broadly speaking,
specialist manufacturing is likely to be focused in the central belt, the industry sector in Fife and
Stirlingshire, and the offshore deployment and support in Aberdeenshire/City of Aberdeen. By
contrast, non-specialist manufacturing and transport and heat provision would be relatively more
evenly distributed across Scotland.
WIDER SCOTLAND
Manufacturing
Some non-specialist manufacture
Transport and heat
Equipment sales and O&M, some
Hydrogen refuelling stations
deployment and operation
ABERDEEN AND
RURAL AND ABERDEENSHIRE
ISLANDS Blue production
Green production SMR/ATR deployment
Platform assembly , electrolyser and operation
deployment and operation Green production
Integrated production/demand Platform assembly and
Distributed green production, deployment, electrolyser
vehicle and heating system deployment and operation,
operation offshore servicing
Manufacturing
Balance of Plant, electrolyser
assembly, bus assembly FIFE AND
Transport and heat hub STIRLING
Equipment sales and O&M, high Green production
HRS deployment and operation Platform assembly and
Industrial demand deployment, electrolyser
Deployment equipment, O&M deployment and operation,
offshore servicing
Industrial demand
Deployment equipment, O&M
CITY OF GLASGOW
Knowledge-based ser vices
Design, consulting, academic
CITY OF
Transport and heat hub
Equipment sales and O&M, high
EDINBURGH
Hydrogen refuelling stations Financial/knowledge-based
deployment and operation ser vices
Design, consulting, banking
Transport and heat hub
Equipment sales and O&M, high
Hydrogen refuelling stations
deployment and operation
82
SCOTTISH HYDROGEN ASSESSMENT - ECONOMIC ASSESSMENT
Number of jobs
generate nearly £20bn of GVA and employ 150,000
83
SCOTTISH HYDROGEN ASSESSMENT - ECONOMIC ASSESSMENT
Hydrogen production
Generation and sale of blue
hydrogen.
84
SCOTTISH HYDROGEN ASSESSMENT - ECONOMIC ASSESSMENT
Scotland has a natural advantage in green However, supply chain competition will be
hydrogen production but there are gaps fierce and electrolyser firms may seek to
in the supply chain. centralise activities in order to benefit from
scale economies. In order to fully capitalise
The green hydrogen supply chain includes
on the opportunity from green hydrogen
both small scale and large scale production
production consideration should be given to
requirements and similar supply chain
how best to nurture these core activities. This
structures apply to both onshore and offshore
may require supportive policies and will be
scenarios. The supply chain elements
subject to the establishment of an adequate
required to manufacture green hydrogen
supply chain, whether locally or extended.
using electrolysis, including renewable
electricity supply, is relatively well supported The sheer scale of investment required to
in Scotland. Scotland has good system realise the green production potential in
integration skills and considerable offshore Hydrogen Economy and Green Export
expertise from the O&G sector which could presents challenges in terms of mobilising
be leveraged for the green hydrogen supply capital and resources and the effort required
chains. It has a range of fabricators and non- should not be underestimated. Access to
specialist component manufacturers that could capital could present a major hurdle to the
effectively compete for non-hydrogen specific achievement of these scenarios.
supply chain elements. It also possesses a wide
range of engineering design and academic
research capabilities that could be brought to Key skills and supply chain present in Scotland
bear.
While Scotland has a limited indigenous manufacturing supply
By contrast, Scotland has limited expertise chain for provision of key plant like wind turbines, it has some
in the manufacture of key system elements key existing and transferrable skills from its renewable and energy
including electrolysers and wind turbines. sectors including:
These would be high value added activities as
would be the specialist extended supply chains • A strong existing renewables sector with many onshore and
that go with them. Scotland could benefit offshore wind developers with locations and active projects
from attracting an existing or new electrolyser within Scotland. The supply chain capabilities are centered
producer to locate an assembly plant in the around development, construction including civil and electrical
region and this would not only generate contractors, and operations.
direct jobs and value but may also lead to the • As electrolysis projects have developed in Scotland
establishment of a local supply chain to service organisations are building up capabilities to support the
that plant. The value of electrolyser assembly development of these projects. EMEC first procured a
has been estimated in Green Export to reach hydrogen electrolyser in 2015 and have since gone on to
£1.5 bn in 2045, creating over 3,500 jobs. expand their portfolio of hydrogen projects.
However, the value attributable to the wider • A number of Small to Medium Enterprises (SMEs) in Scotland
supply chain could increase this further if specialise in areas of the electrolyser supply chain. Examples
manufacturing component elements, could also include: Pure Energy Centre, an electrolyser integrator or
be established locally. assembler located in Shetland and; Logan Energy a system
Scotland has a natural advantage in green integrator and operator based in Edinburgh.
hydrogen production given the huge potential • Scotland’s O&G sector has transferrable skills in the supply
offshore and onshore resource and for this and service of process engineering kit.
reason, attracting local electrolyser or wind
turbine assembly plant to Scotland is a credible
goal.
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SCOTTISH HYDROGEN ASSESSMENT - ECONOMIC ASSESSMENT
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SCOTTISH HYDROGEN ASSESSMENT - ECONOMIC ASSESSMENT
In Hydrogen Economy where the existing network is maintained, the GVA contribution from
the transmission and distribution sector is modest at roughly £1.5 bn in 2045, while sector jobs
could be significant reaching nearly 10,000. As discussed in Table 9, these jobs will be largely
retentive of existing economic activity in the transmission and distribution of natural gas and will
be relatively distributed across the country.
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SCOTTISH HYDROGEN ASSESSMENT - ECONOMIC ASSESSMENT
Scotland has a good range of skills in Scotland has limited skills in hydrogen
transmission and distribution refuelling stations technology development
Scotland possesses a good range of skills in Scotland has some existing capabilities in
the field of pressurised gas transmission and the operation of hydrogen refuelling sites,
distribution and this is supplemented with such as the ones in Aberdeen to service the
capabilities in petrochemicals and O&G. bus fleet. However, to date the sites have
The use of hydrogen in the gas network will been built and maintained by non-Scottish
be explored in the H100 project, a world entities. Much of the value associated with
first for the supply of 100% hydrogen to a the deployment and operation of hydrogen
cluster of homes in the Fife region, and this refuelling infrastructure could be captured in
might allow the development of specific IP. Scotland although this may not be very high
Scotland has developed emerging skills in value added if the core IP is owned outside
hydrogen storage which will be required to Scotland. Efforts to localise the design and
act as a buffer to account for short and long manufacture of elements of the hydrogen
term variations in production and end use refuelling stations could be initiated in
and could take the form of both pressure or order to maximise the benefits captured in
cryogenic vessels and geological stores such Scotland, although core IP is likely to remain
as porous rock or salt caverns. with the industrial gases companies, e.g. Air
Products, BOC Linde.
Much of the value associated with the use
of hydrogen as an alternative to natural gas
in the gas network could be captured by
Key skills and supply chain present in Scotland
Scottish firms. An opportunity to capture
additional value and jobs in the deployment Scotland has an indigenous supply chain that supports the import,
of new transmission or distribution grid export, distribution and storage of natural gas. That supply chain
infrastructure also exists, particularly is likely to decline in a strong electrification scenario, but will be
in Green Export. However, since the transferrable to hydrogen depending on the scenario:
geographic detail needed to evaluate this is
beyond the scope of the current study, this • SGN, the Scottish Gas Distribution Network Operator
has not been included. (GDNO), are developing a world leading demonstration
project intending to build a 100% hydrogen network in
Scotland.
• Scotland’s chemical industry, largely centered around
Grangemouth and Mossmoran, could provide the skills and
infrastructure required to convert and transport hydrogen
derivatives including ammonia, organic hydrogen carriers or
metal hydrides.
• The ports and harbors of Scotland support a diverse set of
offshore industries including the import/export of natural gas.
Specialised facilities exist in the Port of Grangemouth and
Peterhead.
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T R A N S P O RTAT I O N : P O T E N T I A L 3,500
OPPORTUNITY IN BUSES AND
BESPOKE HEAVY DUTY VEHICLES 3,000
£m
2045. HGVs and buses generate most value 1,500
added, primarily from their operation,
although much of this is substitutive and not 1,000
additional, see Figure 46.
500
Job numbers are also significant with
employment of around 80,000 in Green 0
Export in 2045. Employment spans 2025 2032 2045 2025 2032 2045 2025 2032 2045
manufacturing and retail but most of the Demand Supply Demand Supply Demand Supply
job creation/retention is expected in vehicle
A: Hydrogen B: Green C: Focused
operation and maintenance (see Figure 47). Economy Export Hydrogen
These activities are generally not additive
but are well distributed across Scotland as Buses HGV Rail Ferries Cars and LGV
discussed in more detail in Table 10. Figure 46: GVA (£m) by transport sector
90,000
80,000
70,000
60,000
50,000
£m
40,000
30,000
20,000
10,000
0
2025 2032 2045 2025 2032 2045 2025 2032 2045
Maintenance Admin
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SCOTTISH HYDROGEN ASSESSMENT - ECONOMIC ASSESSMENT
Buses Manufacturing Generally not additive since O&M widely distributed with
Bus assembly and system hydrogen buses replace all towns/cities operating
integration. existing vehicles and bus fleets.
services.
Maintenance Manufacturing is assumed
Manufacturing, for example concentrated in Falkirk
Maintaining the bus fleet. at Alexander Dennis Limited where ADL has its
Jobs in 2045 (ADL), could be additional. manufacturing facility.
Transport ser vices
A: 19,600 Provision of services though
B: 21,900 operation of the bus fleet.
C: 7,700
HGV Maintenance Generally not additive since Jobs and value added are
Maintaining the HGV fleet. hydrogen trucks replace expected to be centred
existing vehicles and around existing depots and
Transport ser vices services. refuelling locations, e.g.
Clydeports.
Provision of services
through the operation of the
HGV fleet.
Jobs in 2045
A: 36,500
B: 36,500
C: 27,400
Passenger cars Retail Generally not additive since Dealership and maintenance
and LGVs Sale of passenger cars and hydrogen passenger cars activities are widely
LGVs. and LGVs replace existing distributed.
vehicles and services.
Maintenance
Maintaining passenger cars
and LGVs.
Jobs in 2045
A: 3,400
B: 17,000
C: 1,600
Trains Maintenance Generally not additive since Jobs and value added are
Maintaining hydrogen trains. hydrogen trains replace expected to be centred
existing vehicles and around existing depots and
Transport ser vices services. refuelling locations.
Provision of services
through operation of
hydrogen trains.
Jobs in 2045
A: 4,300
B: 4,300
C: 4,300
Water transport Maintenance Generally not additive Operation of ferries is
Maintaining hydrogen since hydrogen vessels concentrated on the west
vessels. replace existing vessels and coast, and Wester n and
services. Norther n Isles.
Transport ser vices
Provision of transport
services through operation
Jobs in 2045 of hydrogen vessels.
A: 2,400
B: 2,400
C: 1,200
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SCOTTISH HYDROGEN ASSESSMENT - ECONOMIC ASSESSMENT
H E A T, I N D U S T R Y A N D P O W E R : 4,500
A N I M P O RTA N T D R I V E R O F D E M A N D
4,000
Value added from the domestic and
3,500
commercial hydrogen heat sector is expected
to be modest at £177 m in 2045, although 3,000
Number of jobs
the number of people employed in the sector 2,500
may be quite sizable reaching nearly 4,000
2,000
jobs in 2045 (Figure 48). This apparent
discrepancy reflects the fact that these jobs 1,500
come from maintaining a very large number
1,000
of domestic boilers. No boiler manufacturing
activities are expected. However, the heat 500
and industry sectors could be an important
0
driver of demand and underpin the roll-out of 2025 2032 2045 2025 2032 2045
production capacity. The contribution from
Scenario A: Scenario C:
industry and power generation is also modest, Hydrogen Economy Focused Hydrogen
reaching a maximum of £263 m in 2045 in
Hydrogen Economy. Similarly, job creation
Figure 48: Number of jobs in provision of domestic and commercial heat by ONS category
is modest reflecting the economies of scale
realisable at large facilities with around 1500
jobs created.
Domestic and Installation and especially O&M of equipment is not In Hydrogen Economy,
commercial heat maintenance of boilers. additional but would lead to highly distributed activity
Note no hydrogen is used job and value retention. but concentrated in areas
in this sector in Green where the penetration of
Export. New equipment installation gas grid most extensive.
may be additional if
installation is quicker than Concentrated deployment in
usual replacement cycle. Focused Hydrogen.
Jobs in 2045
A: 4,000
C: 800
Industrial heat Maintenance The replacement of GVA and jobs likely to be
Maintaining industrial equipment may provide centred around existing
boilers. some additional value industrial sites on the east
but activity is largely coast, e.g. Grangemouth.
replacement / retention.
Jobs in 2045
A: 1,500
B: 800
C: 400
Power Operation of hydrogen- Likely to be replacement Locations around existing
generation fuelled generating plant - / retention as hydrogen gas- or diesel-generating
relatively sizable in Focused replaces natural gas. plants, e.g. on the islands
Hydrogen, given low and some onshore locations
overall usage, but limited in such as Peterhead.
Hydrogen Economy and
Green Export.
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SCOTTISH HYDROGEN ASSESSMENT - ECONOMIC ASSESSMENT
Scotland has an opportunity to build There is a relatively limited indigenous supply chain of OEMs
on existing skills in higher value added supplying key equipment for heating applications. However,
activities such as the design and production the existing gas supply chain has transferrable skills and some
of stationary fuel cell for power and heat highlights in terms of Scottish experience include:
applications and leverage it into the heat
• Doosan Babcock, an international engineering company with
sector. Outside systems integrators such as
an office in Renfrew installed the UK’s largest hydrogen fuel
Logan Energy, Scotland’s capabilities are
cell system at the Aberdeen Exhibition and Conference Centre
currently limited and consideration should
(AECC) which provides heat and power for the venue.
be given as to whether support mechanisms
for technology developers could be used to • SGNs H100 project will lead to the development of local
further this sector. However, it should be supply chains for the installation and maintenance of domestic
emphasised that well established and well hydrogen equipment.
capitalised players in this domain may limit • Enocell, based in Lanarkshire, specialise in fuel cells that are
the potential for Scottish players to emerge. designed to provide power generation in rural communities
Scotland does possess extensive skills in heat that have limited access to grid power. The company was
and power generation system installation, founded in 2011 as a spin out from the University of Aberdeen.
operation and maintenance which could
• There are a number of SMEs in Scotland that can provide
likely be repurposed to hydrogen based
subcomponents for fuel cell manufactures, for example
systems, retaining value and jobs in Scotland.
Ceimig, based in Dundee, specialise in precious metals and
manufacture fuel cell catalysts.
• Logan Energy has capabilities in stationary fuel cell integration
and deployment with installations around the UK including
the Palestra building in London. They also carried out the
integration work on the Levenmouth Community Energy.
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8.
KEY MESSAGES
AND NEXT STEPS
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SCOTTISH HYDROGEN ASSESSMENT - KEY MESSAGES AND NEXT STEPS
8 KEY MESSAGES
AND NEXT STEPS
It is clear that hydrogen will play a role in However, gaps remain in the supply chain for
decarbonising Scotland’s energy system both green and blue production that will need
and economy by 2045, though the extent of to be filled in order to ensure that Scotland
that role is uncertain. Targeted investment gets the most out of a transition to hydrogen.
in hydrogen can help Scotland to realise
a secure, flexible, cost effective and low Co-ordination of efforts across
carbon energy system while achieving green industry and government
economic recovery from the Covid-19
downturn and a Just Transition from an O&G Better co-ordination will enable an efficient
dominated economy. transition and ensure economic opportunities
are maximised.
8.1 KEY MESSAGES There is already significant momentum from
The stakeholder engagement and the analysis both industry and government in hydrogen
conducted for this assessment identifies demonstration and development, supported
key themes that need to be considered if by a complex network of research and
Scotland is to maximise economic benefit and innovation programmes and funding sources.
overcome the challenges of decarbonisation. The regulatory framework is complex,
risking possible gaps and overlaps in terms of
Scotland could grow a strong roles and responsibilities.
hydrogen economy supporting jobs
and GVA growth Co-ordination of these programmes across
the hydrogen supply chain will ensure
Value can be captured through investing in efficient delivery and value for money. A
innovative technology and commitment to number of stakeholders raised the possibility
infrastructure. of:
Green hydrogen production from offshore • A dedicated co-ordination/regulatory
wind can be a catalyst to generate nearly £20 body for hydrogen, similar to the role of
bn of GVA and employ over 200,000 people the OGA;
in 2045. The natural advantage that Scotland
• A body co-ordinating research and
has in renewable energy supply, combined
innovation, similar to the role of the
with the considerable offshore expertise from
Catapults or OGTC; and
O&G, can be leveraged to position Scotland
as a key exporter of high purity, green • Creation of a public-private sector
hydrogen. leadership steering group to ensure that
industry and government work closely in
Blue hydrogen production can be used to developing and delivering the strategy.
develop expertise and services in the sector
that could be exported worldwide, in a
similar way to the capabilities in the O&G
sector that are exported currently.
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SCOTTISH HYDROGEN ASSESSMENT - KEY MESSAGES AND NEXT STEPS
Green hydrogen is likely to • Stakeholders agreed that green hydrogen is the ultimate goal and that
feature in some capacity Scotland should move decisively to crystallise that opportunity.
in Scotland’s energy
• Scotland should set an ambitious 2032 target and ensure there is a fiscal
economy and its role will
regime to support delivery against the target as has been done by the
likely grow in the long
EU and other countries such as Germany. Clear future targets for green
term.
hydrogen production will give producers and investors a clear framework to
work within.
• Action should be taken to cement economic value in Scotland e.g. system
integration or manufacturing.
Scotland could become • The cost competitiveness of green hydrogen from Scotland needs to be
a large scale producer of explored and understood particularly in relation to other potential sources
green hydrogen for export, of green hydrogen production including solar power in the souther n Europe
most likely to Europe. and North Africa.
• The practicalities of mass export of large amounts of hydrogen need to
be investigated, i.e. whether hydrogen is transported by ship (as liquid
hydrogen, ammonia or via liquid organic hydrogen carrier) or via gas
pipeline.
• The needs and requirements of potential export markets, such as Germany,
need to be understood with some degree of co-operation between import
and export markets.
Hydrogen is an opportunity • Rural areas and islands need support to unlock their renewable potential
for rural areas and islands by understanding what the best options for hydrogen use locally are
to har ness their renewable considering distribution of supply, demand and export.
energy sources.
• There is a need to evaluate how hydrogen costs compare to the current
energy costs in order to understand where it can be deployed.
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SCOTTISH HYDROGEN ASSESSMENT - KEY MESSAGES AND NEXT STEPS
Blue hydrogen could • Commitment should be made to build out of a blue hydrogen project (such
be an important part of as Acor n), which can provide a low cost supply at volume in the short term.
Scotland’s future in the
• Evaluation should be undertaken of the scale up of production of blue
short to medium term.
hydrogen in conjunction with wider CCUS initiatives.
• Consideration should be given on how this would help to match supply with
demand and potentially allow the gas network to be leveraged.
There are low regret • Support mechanisms for vehicle operators, bus companies, local councils
options for building etc should be explored.
hydrogen demand in the
• Further transport routes that could benefit from hydrogen could be identified
short to medium term,
and existing routes should be expanded.
especially fleet vehicles.
This can be led by buses • Points of demand need to be matched with sufficient, secure supply of high
but also includes HGVs, purity hydrogen.
non-electrified rail and
• Continue to build upon existing transport initiatives such as the:
water transport.
- Automotive Industry Advisory Group
- H2 Accelerator in St Andrew’s
- Michelin Scotland Innovation Parc
Hydrogen is a good option • Need to understand more about Scotland’s specific industrial demands e.g.
for industrial applications. process heat or feedstock. The demands of a few users will have a large
proportional impact.
• There is an opportunity to potentially accelerate deployment of hydrogen for
specific demand sectors such as food and drink production.
There are decisions to • It is likely that all heat decarbonisation solutions (hydrogen, electrification,
be made as to whether CCUS and district heating) will be required to decarbonise the range of
hydrogen should be used heat applications. Research needs to continue to determine the best
in the gas distribution decarbonisation solutions for each application (domestic, commercial and
network. Hydrogen is industrial heat) considering safety, techno-economic viability and consumer
a potential option but acceptance.
there are other options,
• This should include at scale demonstration of hydrogen for heating in
electrification, district
domestic, commercial and industrial applications.
heating and CCUS (for
industry).
Hydrogen production, • Development of supportive policies and assistance to establish an adequate
either blue or green, could supply chain, whether locally or extended will unlock value.
bring significant economic
• Undertaking detailed analysis and mapping of the hydrogen production
value and jobs to Scotland
supply chain, examining Scotland’s strengths and gaps could help to identify
particularly if more of the
areas where Scotland could look to build capabilities in order to capture
supply chain could be
GVA and jobs.
captured within Scotland.
• Targeted innovation funding can allow for energy skills transition.
There is a complex • There is a need to work with key UK and Scottish regulators to ensure that
regulatory, framework, and the regulatory position for hydrogen is clearer.
a lack of clarity of roles in
• Funding mechanisms need to be developed to support the policy objectives.
some areas.
• Coordination is required to ensure value-for-money from innovation project
funding.
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