Written evidence submitted by MCS Charitable Foundation (HCC0009)

MCS Charitable Foundation Response to: Scottish Affairs Committee call for evidence  -  Hydrogen and carbon capture in Scotland

Submission by   Richard Hauxwell-Baldwin

Call available at: https://committees.parliament.uk/work/1723/

Title:  Research & Campaigns Officer

Organisations: MCS Charitable Foundation

MCS Charitable Foundation

Our vision is a world where everyone has access to affordable and reliable renewable energy and zero carbon technologies – for the benefit of our environment, our communities and the general public.  As a Foundation we work to increase public confidence, awareness and access to renewable energy and zero carbon solutions across the UK. We support education and engagement programmes, fund research and facilitate innovative solutions to drive widespread adoption.

In addition, the Foundation oversees the Microgeneration Certification Scheme (MCS) which defines, maintains and improves quality standards for renewable energy at buildings scale.

1. To what extent are the ambitions of the UK Hydrogen Strategy, published August 2021, adequate for Scotland?

We welcome the publication of the Government’s Hydrogen Strategy. However, it is our position that the strategy does not provide sufficient clarity or detail to provide the necessary assurances that hydrogen has a significant role to play in achieving the Government’s net zero ambitions. In particular, the role of blue hydrogen must be addressed.

We support the strategic use of green hydrogen (i.e. using renewable energy to power the electrolysis process required to manufacture green hydrogen) in the hard to decarbonise sectors like shipping, transport, heavy industry and aviation. We are strongly supportive of the Scottish Government’s plans to only use their £100m funding from the Emerging Energy Technologies Fund for renewable, i.e. green hydrogen projects. We urge the Scottish Affairs Committee to persuade the UK Government to abandon the use of blue hydrogen, redirecting the £240m Net Zero Hydrogen Fund to green hydrogen development only, including in Scotland.

We do not support the use of blue hydrogen (i.e. derived from fossil gas) in any strategy that aims to achieve net zero. And we are not alone in this view. In announcing his recent resignation, the Chair of the UK Hydrogen and Fuel Cell Association stated that he would ‘be betraying future generations by remaining silent on that fact that blue hydrogen is at best an expensive distraction, and at worst a lock-in for continued fossil fuel use that guarantees we will fail to meet our decarbonisation goals.’

MCS supports the strategic use of green hydrogen (i.e. using renewable energy to power the electrolysis process required to manufacture green hydrogen) in the hard to decarbonise sectors like shipping, heavy industry and aviation. MCS does not support the use of green hydrogen for domestic heating. Using green hydrogen to heat our homes is up to five times more expensive than current natural gas prices[1], and up to seven times less efficient than using renewable energy to power a heat pump[2]. With heating accounting for around 23% of UK emissions, this is an obvious and urgent area in need of decarbonising, and recent research[3] has highlighted that heat pumps, not hydrogen should be the policy focus to achieve this over the next decade, and that even adopting the Government’s plan to blend hydrogen could lead to a 16% additional rise in bills[4].

There is questionable value in going down a twin track approach, when one of the tracks is likely to be eye-wateringly expensive, can only be an interim measure as incompatible with net zero emissions, and relies on the construction of two currently non-existent infrastructures in the form of large-scale hydrogen production and distribution facilities and large-scale carbon capture and storage (CCS) facilities. Moreover, with the current surge in gas wholesale prices, the economics of blue hydrogen start to become questionable.

As both the UK Hydrogen Strategy and the Draft Hydrogen Action Plan for Scotland notes producing blue hydrogen is a carbon intensive process that relies on CCS to transform it into a ‘low carbon’ energy source. However, Scotland has no operational, large-scale CCS facility. And with the recent announcement that the Scottish Cluster had not been awarded funding through the first round of the UK Government’s £1bn CCS Infrastructure Fund, serious questions must be asked about the ability of the Scottish Government to fund the future development of the cluster. The Scottish Government recognises this, with Scottish Energy Secretary Michael Matheson observing that:

“Unfortunately we do not hold all the necessary legislative and regulatory levers needed to support the Scottish Cluster, as they are not devolved. We cannot simply go it alone with our funding. Our offer of support is therefore made on the basis that the Scottish Cluster is given certainty of its due status within the UK sequencing process and I once again urge the UK Government to provide this certainty for the benefit of our energy sector and for our ability to deliver a just transition to net zero.”[5]

However; that certainty is not forthcoming, placing the whole Scottish CCS project at risk. More fundamentally, given the history of time and cost overruns and failure of several high-profile projects in the US and Australia to capture the intended quantities of carbon emissions, relying on CCS is a poor plan.

The issues of CCS costs and performance are significant ones. One of the principal models used to estimate the global requirements for CCS in reaching the Paris Agreement targets is the International Energy Agency’s Sustainable Development Scenario (IEA-SDS). The model takes into account the global pledges made as part of the Paris Agreement, and requires 15% of all emissions reductions to be achieved using CCS. Translating that into the real world, the 2021 Global CCS Institute[6] report “Unlocking Private Finance to Support CCS Investment” states that:

“The need for CCS in the IEA-SDS translates to an estimated 70-100 CCS facilities built per annum, for which we estimate the total capital requirement to be between US$655 bn and US$1280 bn. To achieve this, the private sector must be incentivised to invest in CCS because the capital requirement far outstrips what governments are willing to pay in the timeframe required.”

Interestingly, and in a somewhat contradictory statement, the 2020 ‘Global Status of CCS’ report[7], also produced by the Global CCS Institute, stated that:

“Large-scale infrastructure projects are capital intensive. Typically, CCS design and construction costs are in the hundreds of millions, sometimes billions, of US dollars. Companies are most likely to invest where there is a large capital injection from government, through direct grant funding, to support private sector equity investments.”

In short, CCS is expensive and will require significant funding from both the UK and Scottish Governments to make it cost-effective for the private sector fossil-fuel incumbents to invest in the required infrastructure.

In 2020, there were twenty-eight commercial CCS facilities around the world, the majority of which have been financed through state-owned enterprises and large corporations. In 2021, this number fell to twenty-six[8], so at a time when 75-100 plants a year should be coming online, we are going backwards with CCS.

Of greater concern is the currently limited capacity either under construction or development (see Figure 1.). As the Global CCS Institute note, given the long lead times for CCS projects (up to ten years, depending on location) it will be a while before this growth in early and advanced development translates into operating projects. Yet at the same time, they claim the ‘rapid increase’ in development is ‘positive news for action on climate change’. The figures for CCS development are, by any measure, a long way from the numbers needed to meet the sequestration figures that climate change targets are based on. The inability of CCS to reach the numbers required of it under the IEA-SDS will have a significant impact on efforts to limit global temperature rises to 1.5oC.

Figure 1 COMMERCIAL CCS FACILITIES IN SEPTEMBER 2021 BY NUMBER AND TOTAL CAPACITY (taken from 4. Below)

Of the twenty-six operational plants, twenty are using CCS as a means of enhanced oil recovery. This is clearly incompatible with achieving net-zero.  It therefore seems a strange policy decision to place such an emphasis on an extremely expensive technological solution that doesn’t exist in the UK, has been slow to develop globally and more worryingly has had significant performance issues where it has been deployed.

A recent peer-reviewed article looking at thirty years of CCS projects has shown that it has failed to deliver on its promises[9]. Despite three decades of significant financial support, only 34 Mt CO2/yr of CCS were in operation in 2019, achieving just 1% of targeted capacity as set out in the 2005 IPCC CCS report. In their paper, the authors reflect on thirty years of CCS projects and note:

1) "the almost complete withdrawal of CCUS in the European Union and numerous project cancellations in Australia, Canada, China, and the United States."

2) The EU wanted to set up 12 CCUS projects by 2015. Yet and despite significant funding the EU failed to award a single CCUS demonstration project.

3) There has been halting of investment and declining effort on CCUS deployment after 2013. Little additional capacity is expected from 2019 to 2022 – at precisely the time that modelling from the Global CCS Institute suggests the need for 75-100 new plants be developed annually to meet the IEA-SDS emission capture rates to meet the Paris Accord goals.

4) "Of all large-scale pilot and demonstration plants, i.e., those with a project size greater than 0.3 Mt CO2 per year, 78% have been cancelled or put on hold."

5) Low carbon prices are identified as a critical factor holding back investment in CCS. With carbon prices rising sharply in Europe, the question remains as to whether this will trigger significantly more investment in CCS or not.

MCS are concerned that the UK Government are not investing in existing low- and zero-carbon technologies such as heat pumps. While we welcome Government’s target of 600,000 heat pumps installations a year by 2028, we consider the ongoing focus on using CCS as a means to sequester emissions, primarily from blue hydrogen production, as an expensive distraction given the new grid and infrastructure for a hydrogen network may not be ready until 2050, meaning we risk reaching our net zero targets. The Scottish Affairs Committee is well-placed to ensure these concerns are heard in Scotland.

Since 2010, close to £2bn of public funds has been committed to develop CCS in the UK in a project that has had no quantifiable impact on sequestering carbon emissions. And with research showing that the greenhouse gas footprint of blue hydrogen may be as much as 20% greater than burning natural gas for heat[10], it becomes even more difficult to support the use of blue hydrogen in any climate change strategy. In the same way that ‘clean coal’ proved a chimera, so too might well ‘low carbon’ blue hydrogen.

More worryingly, the strategy sets out a timeline to at least 2030 before hydrogen begins to play a role in heating our homes, and then only through the construction of a ‘hydrogen town’ of 60-70,000 homes to test the feasibility of hydrogen at scale. Yet any assessment of the speed of action required for UK’s legally binding carbon targets for 2030 and 2035 shows substantial action is essential long before hydrogen can play a major role.

In addition, we urge Government to act now and introduce a range of policy measures which will provide the incentives for investment in the genuinely zero carbon solutions for homes, including the heat pumps essential to ensuring heating is clean without the need for blue hydrogen. Measures needed include:

• Removing VAT on all domestic renewables and energy efficiency measures for a period of 10 years to reduce costs not only in Scotland, but across the UK
• Introducing loans such as such as Property Assessed Clean Energy (PACE) Loans at 0% interest rates available for all households underwritten by the Government to support retrofitting of existing properties
• Introduce a new long-term incentive/grant scheme of at least 10 years for all domestic renewables and energy efficiency measures, including heat pumps
• Introducing tax credits of up to 30% of the value of capital costs for energy efficiency and renewable energy equipment, capped at £15,000
• Reducing the tax burden on less carbon intensive fuels and removing subsidies and rebates on fossil fuels
• Ban all fossil fuel heating from all new build properties by December 2023

The latest IPCC report makes for stark reading. It provides the clearest warning yet that we must act now if we are to mitigate against the worst impacts of climate change. We urge the Scottish Affairs Committee to recognise that the UK Government needs to show true leadership around its net zero ambitions and abandon the folly of blue hydrogen, and introduce as a matter of urgency a clear and comprehensive policy roadmap focussing on the development of the green hydrogen economy to help hard to decarbonise sectors like shipping, transport, heavy industry and aviation, and support existing low- and zero-carbon technologies such as heat pumps to decarbonise our homes. Failure to do so will result in another wasted decade of policy inertia at a time when we have no time to waste.

To conclude, we do not believe that the ambition of the UK Hydrogen Strategy is suitable for any nation within the UK due to its focus on blue hydrogen. We urge the Scottish Affairs Committee to encourage the UK Government to abandon the blue hydrogen track and follow Scotland’s lead in only providing funding for the development of green hydrogen projects.

2. What should be the focus of UK Government investment to ensure that Scottish industry, supported by Scottish research, is able to become a world leader in green hydrogen for domestic use and export?

      No response

3. Which market mechanism should be used to incentivise investment in producing low-cost green hydrogen?

No response

4. What infrastructure, and investment in infrastructure, is needed for green hydrogen to be easily available for heavy transport and buses across the whole of Scotland?

No response

5. What role should the oil and gas industry play in achieving a “just transition” to blue and green hydrogen in Scotland?

As noted in our response to Q1., we do not believe that blue hydrogen has a role to play in Scotland due to the costs involved, together with the time frame and doubts over the ability of CCS to be deployed at scale. Therefore any ‘just transition’ should involve identifying and enabling the retraining of the existing skilled workforce into green hydrogen and/or heating engineers.

6. What training is required to build a hydrogen-ready workforce in Scotland? What is the long-term sustainability of the Scottish workforce for hydrogen power?

No response

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February 2022