Energy and Utilities

UK government publishes hydrogen sector development action plan

Published on 26th Jul 2022

New plan sets out the government's view of the current and future opportunities across the hydrogen economy in the UK

On 20 July 2022, the government published its Hydrogen Sector Development Action Plan. This follows on from the UK Hydrogen Strategy (published in August 2021) and the British Energy Security Strategy, the latter of which doubled the government's 2030 target for low carbon hydrogen production capacity to 10GW. The newly published action plan aims to highlight the nature and scale of opportunities across the hydrogen economy in the UK, focusing on four key areas: investment; supply chains; jobs and skills; and exports.

Investment 

The action plan sets out how government hopes to continue to understand and develop investment plans to support the UK hydrogen economy, by engaging both industry and investors.

The plan includes a government-produced summary investment profile for hydrogen production, transport and storage, and end use (which considers, among other things, investment opportunities and government priorities). It estimates £9bn of investment is required to meet the production aim of 10GW by 2030. It further sets out proposals to help stakeholders understand where and when investment is needed (through holding regular roundtables), and the use of digital tools to showcase UK projects to potential investors.

Supply chains

The government's understanding of how the UK supply chain has progressed since the publication of the UK Hydrogen Strategy (as informed by government-commissioned research) is set out in the second section of the action plan. It highlights the existing strengths and capabilities within the UK hydrogen supply chain, not only in driving national hydrogen development and deployment, but also in promoting hydrogen export globally.

The action plan does, however, acknowledge that more work is needed to grow existing supply chains  to prepare for the anticipated increase in demand and to meet hydrogen production targets. In future,  the government will look to boost investment in the emerging hydrogen market by working with trade associations and industry to deliver supply chain development events, including future “Meet the Specifier” events.

The government has also said that it will ask industry to lead a process to determine appropriate levels of ambition for UK supply chain participation in hydrogen projects, and will provide an update on how it intends to carry out this process by the end of 2022.

Jobs and skills

The action plan notes the importance of supporting the current energy workforce to transition into emerging green growth industries, and the potential for the hydrogen economy to provide a significant number of green jobs across the UK.

As noted in the government's Green Job's Taskforce 2021 report, many of the skills needed within the hydrogen industry are transferable from other sectors in the UK, such as engineering, construction, and health and safety. The action plan sets out how the government intends to support this skills transition and help ensure the availability of the skills needed to deliver on its ambitions for the UK hydrogen economy.

Exports

Given the increasing global demand for alternatives to traditional fossil fuels and the recognition of the ability of hydrogen to help reach net zero targets, the government's ambition is for the UK to "play a leading role" in the international hydrogen market. The action plan sets out potential future hydrogen export opportunities for the UK, and how the government intends to support and promote those opportunities. This includes plans to develop a hydrogen certification scheme which could become mutually recognised internationally with other schemes, and will work to support exports in new and renegotiated trade agreements.

Osborne Clarke comment

The action plan reiterates the government's view that hydrogen is a central part of the UK's future energy security and its commitment to reach net zero by 2050. The plan builds on the government's existing policies and strategies for hydrogen, providing a useful indication of the direction of travel on key issues facing the nascent industry. 

Though the government acknowledges that "this Action Plan is not exhaustive, and government will not stand still,"  there are many important issues that remain unanswered. These include questions around the issues of blending, reference and strike prices, volume support and indexation, all of which are discussed further in this Insight. Though the direction of travel indicated in the plan is to be welcomed, the true future extent of hydrogen on the route to decarbonising the UK economy, and the role of the UK in the wider international hydrogen market, remains uncertain.

For an introduction into the role of hydrogen in the journey to net zero, watch our webinar here, and for more information sign up to our upcoming hydrogen in-depth webinar series.

This article was produced with the assistance of Phoebe Cournane, Trainee Solicitor

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* This article is current as of the date of its publication and does not necessarily reflect the present state of the law or relevant regulation.

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