Overcoming growing pains in the UK's hydrogen sector

Speaker A: Foreign. Hydrogen has gone from being the energy sector's hottest hype story to a technology facing tough questions about cost, policy and delivery. But has the bubble really burst? Or is hydrogen simply growing up? In this episode of the Energy Transitions Podcast, I speak with Clare Jackson, CEO of Hydrogen uk, to explore the industry's awkward teenage phase, why investors are growing impatient, and what needs to happen next for hydrogen to play its crucial role in decarbonising heavy industry, strengthening energy security and powering the UK's net zero future. Claire also calls on the UK government to take the policy breaks off before the UK loses its global competitive advantage. I'm Pamela Larg and this is the Energy Transitions Podcast. Claire, thank you so much for joining me today to talk about hydrogen, a very exciting topic. Uh, and of course, there was a bit of a hydrogen bubble and then it seemed to burst. Uh, so my question to you is, has the hydrogen conversation become a little bit more realistic and constructive over the past few years?

Speaker B: Well, no. Well, firstly, thanks so much for having me. It's, uh, fantastic to be here. Um, I mean, I think the hygiene industry has gone through a sort of very interesting few years. I think, as you said, you know, a few years ago, you know, hygiene was very much the cool new kid on the block. Um, everyone was very excited about the possibility of all these very many things that Haitian was going to do, deliver on, uh, all of our energy needs, cure cancer. You know, there was a lot of, you know, excitement around, around Heischen. I think what we've seen over the last couple of years is a sort of, I guess, a tightening of the role that Haitian's going to play. Um, so, you know, I sometimes describe it as, you know, historically there was this sort of like, big cloud of possibilities of things that Haishin might do. And now it's a little bit more like a cannonball. You know, it's smaller, but it's, it's more solid and certain. Um, and that's really helpful for investors and the industry. I think what we're also seeing is, you know, the reality of what happens when you actually try and deliver something. Um, and this is something that has happened. We've seen in sort of solar, offshore, wind. We basically see in every new energy technology is there's a lot of excitement. Um, you then actually have to try and deliver it. There are challenges associated with that. Sometimes I feel like, you know, the hygiene industry trying to get projects off the ground is a little bit like a game of whack a molecule. But, you know, the reality is, is we're now starting to see sort of projects come forward and sort of come through the sort of other end of that and actually take final investment decisions, start construction. And even in the uk we've seen some that started, um, operating. So, you know, it's, it's a very natural and normal experience and journey that new energy technologies go on. And, you know, Haitiun is going through that. Me and, uh, my colleagues sometimes argue about whether it's the terrible twos or the awkward teenage phase. But, uh, you know, hygiene's going through it, it's growing up, it's becoming a reality, um, which is, you know, really exciting. But yes, said it comes with challenges. Um, and I think, you know, the other thing is, you know, again, this is kind of a little bit what happens when you start out in a new sort of technology area. A new energy technology area is there's lots of projects that get announced. It's very cheap and easy to announce a project. And then as the sort of, you know, that progresses, you see the very best projects sort of coming forwards and actually making it through. And there are some projects which, um, don't make, make it. And so you see sort of, you know, headlines around, you know, projects not making it through and not, not, not sort of moving forwards. Um, but equally there's also projects that do, um, and so, you know, sometimes the sort of media coverage and what you see on LinkedIn or wherever it is that you get your news, sometimes you end up with this sort of like, mixed picture. But, you know, the reality is, is the best projects are coming forwards. They are, um, making it through and it's, it's a reality now, which is hugely exciting. So, yeah, we're going through the awkward teenage phase, but this is what we would expect from any new technology, exactly what we've seen in others before.

Speaker A: I almost feel as if we're looking forward to that midlife crisis phase once hydrogen hits that late maturity phase. So how would you describe the state of hydrogen in the uk? I mean, in terms of policy, investors, uh, investors confidence, um, and basically what is the market doing?

Speaker B: Yeah, so we're in a sort of a strange place at the moment in that, you know, what we've done over the last few years is we've put a lot of time in, both within government and within industry, to developing investable policy frameworks, to developing the projects that are ready to be invested on with that sort of policy framework. And in many ways we're in a fantastic position in that we've got a pipeline full of fantastic projects that are, you know, well thought through, well designed. That's a lot of investment has already gone into, which is great. We've got £20 billion worth of private sector investment that is ready to go and really wants to invest in the UK hydrogen sector. And we have investable business models. So we actually have, you know, we're actually in many ways in a fantastic position. However, what we've experienced over the Last sort of 6 to 12 months in particular has been a real slowing down of the pace of government policy. And particularly in the last six months, you know, we were supposed to have a, uh, Heizhin strategy refresh in by the end of last year that has yet to materialize and we still don't know when we're going to see it. We have some of those wonderful projects that I described are in the Hygiene Allocation Round two that put in their applications with government now over two years ago. Um, we've seen the shortlist, but we still haven't had the ITOs from government, which is. I can't tell you how challenging that is for investors and projects when, again, there's no line of sight as to when that's happening. So we're in a very strange position where in theory we should be in a great position, investor confidence should be sky high, we should be kicking on. But the fact that we've seen this sort of 6 to 12 month hiatus almost is incredibly challenging for investors. It doesn't paint a good picture of the sort of the ongoing government support for hydrogen. And, you know, we're starting to see investors wobble and think about taking their investment elsewhere, which is, I mean, it's criminal, given the work and given the position that the hydrogen industry should be in, in the UK at the moment, and the hard work that's gone into it, as you can imagine, really, really keen for the government to deliver on what it said that it was going to do. What.

Speaker A: Why do you think there is this policy wobble or the sort of reticence from government? And do you think that the UK is actually at risk of losing investment to other countries?

Speaker B: Uh, uh, absolutely. As I said, the UK is a fantastic place to invest in hydrogen. We've got the projects, we've got the geology, we've got the policy frameworks that we know are investable because the first set of projects have managed to invest based on it. The reality is that investors won't wait, capital won't wait. And as other countries, you know, like Spain and Germany and, you know, others across, across the Channel Are, you know, continuing to move forwards. The UK becomes less investable by the day. So it's absolutely critical that the government, you know, delivers on what it said it was going to deliver and, and gets the industry moving again. And we're at a very sort of critical juncture for that at the moment. So it's a really critical time for the hygiene industry.

Speaker A: Yeah. Investors often say that they need, they need certainty more than subsidies. So this is obviously a clear case that this is an issue. They just, like you say, they don't have that line of sight. So would you say that this is actually the biggest barrier is this policy uncertainty?

Speaker B: Yeah, I mean, absolutely. I mean investors need, they need government to lay out what it's going to do and then they need government to deliver on that. And at the moment government has only done half of that. It's, you know, we know what it is that they want to do. They've developed the frameworks. But without the hygiene strategy refresh and without the sort of delivery of the half two ITOs and the various other policy, um, framework and pieces that the government has promised, it's really challenging for investors, you know, particularly if we take the HAR2 projects, for example. Those projects on average are spending £75,000 every month waiting for a government decision. And uh, it's just not sustainable. It's just not sustainable. And so, yeah, it is absolutely critical that we get moving on it. And the industry does still need, um, the support from governments. We are a nascent industry and as we've seen from, you know, many other low carbon industries, you know, offshore wind, you need that initial government support to get scale up and to get costs down. But you know, the policy cost comes down with time as the scale goes up. So we're, it's tricky as a nascent industry to, to ride some of these, you know, the roller coaster of, of, of, of government inaction. So it's, it's, it is in, it's, it's incredibly challenging.

Speaker A: Frustration aside though, there are projects that are really exciting, uh, and I'd like to know what projects have your attention at the moment.

Speaker B: There's some really exciting projects that are going on. Um, a fantastic one which has just become sort of operational and is sort of finished construction is the Geopurus High Marnum project. That was the first of the HAR1 projects to take final investment decisions, start constructing, start operating. And that's massive for the industry to, you know, seeing is believing and actually starting to see some of these projects become a reality is Hugely exciting. Got a range of um, projects within the sort of um, the har2 program as well. We've also seen some other projects um, that have taken final investment decision. You know the most recent one, um, is Carlton Powers project in the northwest. So we're starting to see, you know, the sort of John B projects take final investment decision and start construction. Which again is just, is hugely important and hugely exciting the industry. You know, we're also, you know we were thrilled last year when the government announced the sort of £500 million for the first transport and storage network. Um, this is so important for, you know, driving down cost of hydrogen, ensuring that sort of multiple off takers are able to access hydrogen, reducing risk associated with the project. So this is a, that will be a real sign of maturity. So again we are waiting for the government to open up that competition. It's all very well and good to announce funding. You've actually got to get on and make sure that that's invested into the industry. And you know there's a, there's, there's a couple of real key contenders to be the first transport and storage network, um, which I guess is a, a, uh, sign of you know, how important hygiene is, particularly in industrial clusters. There are, you know, multiple industrial clusters that are desperate to be the first and, and also you know, the uh, the sort of state of the hygiene industry at the moment. So, you know, we're really excited to see that. But again the most important thing is that we actually get on and do it.

Speaker A: We've, we've seen that there's a lot of investment and um, focus that has gone into hydrogen supply. Is there sufficient focus on hydrogen demand?

Speaker B: Yeah, I think this is a, this is a really interesting question and I think you're absolutely right. If you look at the sort of first hydrogen strategy and um, the bits and pieces that have happened over the last sort of, you know, three, four, five years, it has been very sort of production focused and you know, for good reason. You need to actually, you know, get the production going and that can sometimes be one of the challenging parts and. But you're absolutely right that there now needs to be a slightly more holistic focus on not just supply but also the infrastructure and the demand. And that's what we've sort of started to see from government. We're expecting this new heischen strategy refresh when we see it, um, to be a bit more demand led, a bit more demand focused and sort of filling in that gap. Um, Heisin uk, we published a report Last year on driving demand, looking at, you know, what areas hygiene needs to deliver in, you know, those areas which, you know, can't be electrified, you know, identifying where we should be focusing, but also like, how do we support people to switch to hydrogen and sort of, you know, supporting some of those offtakers as well. So. Absolutely right. We need to be, you know, hydrogen is a means to an end. It's not an end in itself. Um, and so focusing on those industries, you know, whether they be in the sort of industrial heartlands, in sort of chemical sector, in refining, in steel production, where we know heisin needs to play a really key role and also in our power system, you know, providing that long duration energy storage, providing that dispatchable power so that, you know, when you need a cup of tea, but the sun's not shining and the wind's not blowing, you can still actually make a cup of tea. Really, really important. Um, so focusing, really drilling down on those areas where we know that hygiene will need to play a key role.

Speaker A: It seems as if hydrogen is really going to be critical for those hard to abate sectors, uh, in terms of decarbonization and reaching our decarbonization goals. Are there sectors that perhaps are more ready, are more hydrogen ready than others? And what sectors are those?

Speaker B: Yeah, for sure. So the ones where the transition is, I guess the most straightforward are ones that are already using hydrogen today, but that hydrogen is not low carbon. It's not, um, not low carbon. So, um, those are the areas which I guess technically are easiest to transition to hydrogen. And then there are others where there's already been sort of, you know, feasibility studies that have been done. There have already been trials of hydrogen. So, you know, there's in glass making, for example, in um, food manufacturing, where hydrogen is being used as a, I guess a heat source, um, as a fuel. And so that's helpful if there's been sort of like trials that have been done already. And steel is another example. So there's some that are definitely, you know, more ready for hydrogen. I think the other thing that we have found when we did our driving demand study is that it's not just about sectors, it's also about sites. So there are some sectors where there will probably be a mix of electrification and hydrogen and ccus, which will not necessarily just depend on the process, but it will also depend on the nature of the site, how big it is, whether you might have to reconfigure things. If you pick a certain technology, um, what the grid connections look like, how long it might take to get, ah, a grid connection and how that lines up with the decarbonization, um, timelines of the particular business. So there's a lot of reasons why sites and sectors might choose hygiene, CCUs, electrification, um, and so it's really, really important that we're working alongside those industries who know their processes really well and know what it is that they need. And many of them have done studies, um, looking at what's the right solution for them. So our aim as an industry within the hygiene industry is to make sure that hygiene is available for every sector and every site that needs it, um, and that no one's left behind in

Speaker A: this and I think importantly that hydrogen actually does become more affordable because, uh, what I've seen is that there's a lot of industrial players out there, they've made these goals to decarbonize and I think hydrogen has been incorporated into the strategy. But some of these plans have had to be paused simply because of the cost associated with including hydrogen in their plans. So when are we going to start seeing hydrogen become more economically viable?

Speaker B: Yeah, that's a great question. There's a couple of different angles to this. So from an off taker perspective, the hygien business model that's been developed by the government will allow off takers to access hygien at the price of natural gas. Um, so from an offtake perspective that's really, really helpful. So you still have to ensure that your project is chosen by government and that there's enough funding available for the projects that need it. But that's from an off taker perspective that shouldn't necessarily be a barrier. The question then is how do we drive the policy cost down? You know, electrolytic hydrogen is in particular is very nascent. It's very linked to the power price. We have very high power prices in the uk, so how do we design our business model to try and reduce the cost of that power? So again, Hygiene UK with, uh, our friends at Renewable uk delivered a report last year called Splitting the Difference, um, which was looking at how we can tweak and refine the policy to try and drive down the cost of electrolytic hydrogen. And we identified a number of measures which would take the strike price down from £241 per megawatt to under 100. Um, so those are just, again, not even sort of like big technology changes, but those are policy and market things that you can do to try and drive down the cost of hydrogen. Um, and the government is actively looking at some of those measures. So hopefully we should be able to bring that cost down. The other element is recognizing the need for ccus enabled hydrogen, which can deliver hydrogen at, ah, scale at a sort of lower cost, a little bit faster and help to sort of kickstart particularly some of that infrastructure or particularly where there's sort of larger volumes of hygiene needed in the short term. So I think those two things together can start to drive down the policy cost of hygiene and help us to scale quicker. So, yeah, those, those are some of the things that we're looking at.

Speaker A: Clare, if you could have a conversation with Ed Miliband and present a wish list of things that you believe are required to really stimulate growth of the UK's hydrogen sector, what would be on that list?

Speaker B: I mean, the reality is, what I would like Ed Miliband to do is to deliver on what his government has already said that they're going to do. I don't want a huge bunch of new things. I just want them to deliver what they said they were going to deliver when they said they were going to deliver it. So I want to see the UK heisin strategy. I want to see, um, the launch of the TNS transport and storage competition. I want to see the HAR3 market engagement. I particularly want to see the HAR2 projects get in their ITOs and their contracts so that they can start building their projects. It's, in all honesty, it doesn't feel like too much to ask, to ask government to deliver on the things that they said that they were going to deliver. So that's, I guess, my sort of big ask, I think, sort of secondary to that. I think the UK has traditionally been pretty good at deploying technology. What we've perhaps been less good at is the development and manufacture of technology and taking advantage of the sort of real economic opportunity that's presented by the energy transition. And often we sort of spot the opportunity a little bit too late, we deploy the technology and then we think about how we can capture the supply chains rather than looking at those two things in parallel. So if I was allowed a sort of a second ask of Ed Miliband or the Secretary of State, it would be to actually look at those two things in parallel. To be working with Department for Business and Trade to develop a sort of supply chain program support that goes alongside the project deployment to ensure that we get as much UK tech as we possibly can and that the UK becomes a global leader not just in the deployment of hygiene technologies, but also in the development and manufacturer so we can maximize the number of jobs, maximize the economic benefit that we can get out of hydrogen, because we think that actually hydrogen offers a fairly unique opportunity when it comes to the energy transition, in that it's a huge future global market, but it's still really nascent. And so there's an opportunity for the UK to take advantage of that. And we've got all the ingredients that we need to be a global leader. But actually if we can do those two things in parallel, if we can actually get on and deliver, um, what we said we were going to deliver on the deployment side of things, but also be supporting and creating an ecosystem where supply chain companies in the UK can anchor and thrive, then I think we're onto a winner.

Speaker A: Claire, my final question to you is, what is it about hydrogen as a sector that excites you and motivates you? What was the hook that got you involved?

Speaker B: Yeah, I mean, I've been in the Hygien space for over 10 years now. I know I don't look old enough, but I think, you know, I first got really excited about Hygen because I realized it was the sort of missing puzzle piece. You know, there are so many things that you can electrify, but there are some things that you can't. And for those things, hygiene is a really, really great option. I think that's, that's part of the reason that I got excited. I think now I also see the really key role that it plays in delivering energy security, energy resilience, in supporting, you know, parts of our economy, uh, that, uh, are vital for national security. So it's, it's, it's, it's so important and I think, you know, we've got a, a window now to get this right and to deliver it and it's so, so important that we do so. Yeah, um, as you can probably tell, you know, very excited, very passionate about this. I think our industry is absolutely fantastic. They're doing, uh, an amazing job and I think it's a really great opportunity to also just get investment and economic prosperity in areas that need it most.

Speaker A: Indeed. And of course Hydrogen UK is going to be central in achieving those goals. Uh, what specifically is your mission at Hydrogen UK in this broader picture?

Speaker B: We've got an amazing industry and our job as the trade association is to support the industry. Our job is to bring together all of those organizations that are super excited about the role that Heisin, um, is going to play and are, ah, committed to making that a reality. And, you know, we're just the sidekick, um, the ones to support them in delivering that and I guess to provide a little bit of, ah, that bridge between industry and government. Yeah, we're not the heroes. Um, it's our industry that are the heroes. And we're just there to be. Yeah, the cool sidekick, indeed.

Speaker A: And maybe provide some guidance, uh, to get through those terrible twos. Well, Claire, it has been such a pleasure to speak with you. Thank, uh, you so much for joining me today. Day.

Speaker B: No, likewise. Thanks for having me.

Speaker A: Thank you for listening to this episode of the Energy Transitions Podcast, brought to you by Enlit and Friends. That's a wrap for me, Pamela Larg, and our producer, Rion Mostert. We hope you can join us next time. Visit Enlit World or subscribe for more episodes.