Written evidence submitted by Comhairle nan Eilean Siar (HCC0017)
SCOTTISH AFFAIRS COMMITTEE
New Inquiry: Hydrogen and Carbon Capture in Scotland
A response from Comhairle nan Eilean Siar, Local Authority for the Outer Hebrides
Comhairle nan Eilean Siar has been involved in Renewable Energy solutions since the 1990’s. The Outer Hebrides of Scotland are home to one of the best Renewable Energy resources in Europe, if not the world, and much has been achieved in the area of community-owned renewables with 21.5MW of generation in place. Unfortunately, an outdated electricity network which views the island as peripheral consumers rather than central generators means that almost 100% of the energy consumed in the islands has to be imported from the National Grid, often at a considerable premium due to ‘locational charges’ embedded in the UK’s electricity network. This even applies to community-owned generation where 100% of the electricity generated has to be exported to Energy companies in the UK because the island electricity network is unable to synchronise with intermittent generation. This exported electricity then has to be bought back from the National Grid by islanders at inflated prices contributing to the islands suffering from the highest rate of Fuel Poverty in the UK.
At present, 420MW of Onshore Wind generation is consented and contracted to Grid in the Outer Hebrides but the Transmission Owner, SSEN Transmission, has been unable to deliver the required HVDC Transmission Link for 14 years now. Latest estimates indicate that the Transmission Link will be in place by early 2027 providing the second of our two main, consented Wind Farms secures a CfD in this year’s Allocation Round. The Stornoway Trust, a local, community owned landowner, has an agreement with one of these Wind Farms to take 20% ownership in the completed Wind Farm and this generation will be used to create a Local Energy Economy, supplying island consumers with renewable, low cost electricity from an on-island Wind Farm.
Relevant to this inquiry, the Comhairle is developing a Net Zero Hub at Arnish, near Stornoway, where exclusively Green Hydrogen (from Onshore and Offshore Wind) will be produced for local use and for export through Stornoway’s new Deep Water Terminal. This Green Hydrogen will supply local demand from Local Authority fleet and Seaweed processing to Power Station systems and household heat. The main local use will be the conversion of SGN’s Stornoway Town Centre Gas Network from Propane to 100% Hydrogen in 2027 as SGN follows a Pathway to Decarbonisation.
To what extent are the ambitions of the UK Hydrogen Strategy, published August 2021, adequate for Scotland?
The level of ambition of the UK Hydrogen Strategy is commendable but its assumptions are too generic and do not take account of regional variations in Hydrogen development. For example, the Policy’s roadmap is conveniently divided into Early 2020’s (2022-24), Mid 2020’s (2025-27), Late 2020’s (2028-30) and Mid 2030’s Onward (2035 on) but these blocks do not align with what is happening in the Outer Hebrides. Here in the Outer Hebrides, we are already largely through the Early 2020’s block and are working on a Mid 2020’s block which includes elements of the Late 2020’s block and even the Mid 2030’s Onward block. This is because we have been opportunistic in our approach to Hydrogen development, responding to stimuli from industry rather than being bound by an artificial Government timetable. To be effective, the Policy should allow for more regional variation across the Hydrogen piece.
As we’ve come to expect of Government policy, the Outer Hebrides are passed over in order to highlight projects with less potential in Orkney and Shetland. In this Policy, Orkney, Aberdeen and Fife are presented as world leading Hydrogen projects while there is only a tangential reference to Low Carbon projects in the Outer Hebrides enabled by the Islands Growth Deal. In actual fact, the Outer Hebrides Net Zero Hub is on a trajectory to outstrip developments elsewhere in Scotland in the race for Green Hydrogen in heat, transport and industry. Island peculiarities mean that the Outer Hebrides will be ready to move to the next stage of Green Hydrogen production before Government policy and mainland Scotland projects catch up; a good example is the early decarbonisation of SGN’s 1,700 consumer Stornoway Town Centre Gas Network.
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?
There seems to be undue emphasis in the Government’s Hydrogen Policy on the production of Blue Hydrogen with Carbon Capture, Usage and Storage. The Outer Hebrides have opted to pursue Green Hydrogen produced from Onshore and Offshore Wind exclusively and the policy should recognise this as a credible pathway on the same, or even a quicker, timeline than Blue Hydrogen / CCUS. The First Mover Disadvantage in Green Hydrogen must be robustly addressed by the UK Government with support required in research and development, technology deployment, equalising battery storage, Hydrogen storage and the cost differential between existing high carbon fuels and Green Hydrogen.
For the first time in history, the Scottish Islands are host to a world beating energy resource which is not severely constrained by a back-to-front electricity network and punitive Transmission Charges. Green Hydrogen can be produced by the community from a copious and constant wind and water resource for local use or for direct export from the production facility to UK and European markets. The cost of Hebridean Green Hydrogen production should, therefore, be the lowest in the UK.
Given that bulk export will feature large in the Hydrogen offer from islands and remote areas, the Government should focus on the development of Liquefied Organic Hydrogen Carriers and should support Hydrogen to Ammonia conversion at Energy Hubs. For our part, we are engaged with one of our ScotWind partners on an ambitious Ammonia Ship Fuelling facility in Norway, involving Siemens Energy, and learning from this project will be applied to the development of Stornoway’s new Deep Water Terminal into a Green Hydrogen / Ammonia export facility.
The production capacity for Green Hydrogen /Ammonia from the Outer Hebrides will be limitless once future generation from ScotWind Offshore Wind Leasing Rounds come into play. Our production capacity will be limited only by the speed at which we can export product. Alongside this opportunity, there is the challenge that, because the North of Scotland Grid will be unable to accommodate electrical generation from future rounds of ScotWind, that generation will simply go into a West Coast subsea ‘bootstrap’ for export to England or France with no benefit for the Scottish Islands. In view of this threat, the Comhairle, Highlands & Islands Enterprise and the Net Zero Technology Centre in Aberdeen have partnered to commission a Technical Feasibility Study into a 1GW Green Hydrogen / Ammonia facility on the west side of the Isle of Lewis. This facility will receive electrical generation from ScotWind installations, produce Hydrogen from that generation, convert it into Green Ammonia (or saturate it in a Liquid Organic Hydrogen Carrier) and export the product in bulk to UK and European markets. This facility will be located close to ScotWind deployments and the IMO’s Deep Water Shipping Route and its capacity (1GW initially) will be governed by the speed at which 365/24/7 export can take place. If a subsea Hydrogen pipeline is ever constructed between Norway and France, taking in UK and Irish production, then Green Hydrogen could be exported in even greater capacities, unhindered by ship availability, movements, weather and so on.
A Green Hydrogen / Ammonia facility of this scale on the west side of Lewis offers ScotWind developers an alternative route to market, drives the decarbonisation of the transport sector in the UK and Europe and creates hundreds of high quality jobs in one of the most economically fragile communities in the UK, helping these communities to retain working age population and attract inward investment. The UK Government should provide specific support for this sort of game-changing development which totally breaks the mould of Policy Roadmap development blocks.
There are clear synergies between Offshore Wind and Green Hydrogen production at scale and support for a facility of the sort outlined above presents wider economic opportunities to develop the island supply chain. For example, the planned Green Hydrogen / Ammonia Production Facility on the west side of Lewis will incorporate a forward Supply Base for ScotWind Deployments in the seas west of the Outer Hebrides. This Supply Base, in itself, provides the driver for the creation of an island-based ScotWind O&M company, operating out of this facility and creating 50+ jobs in an economically fragile area. Again, Government should be providing integrated support to develop production, O&M and export / end user benefits.
Which market mechanism should be used to incentivise investment in producing low-cost green hydrogen?
Carbon should be priced to the point where Hydrogen becomes competitive and the Government should intervene in ‘First Mover Disadvantage’ situations to close the cost gap between existing high carbon fuels and Green Hydrogen. If it is not addressed, this cost gap could become a showstopper for our plans to convert SGN’s 1,700 consumer Stornoway Town Centre Gas Network from Propane to 100% Green Hydrogen since, with a binary switch like this, we cannot reasonably expect the consumer to pay more for their lifeline gas (heating and cooking).
The RTFO seems a reasonable measure and it is one which we will use in the early roll-out of Green Hydrogen production at the Net Zero Hub.
Levelised cost will be critical to development of a Scottish Hydrogen economy and economies of scale will not be achieved until first adopters, like Comhairle nan Eilean Siar, enter the arena and gradually build Hydrogen production in a format that can be adopted by other Energy Hubs across the UK without going through the painful learning process. Without first adopters, there will be no Hydrogen economy and, without direct Government support, there will be no first adopters. With adequate support, the levelized costs shown in Table 2.2 (page 31) could be well beaten by the reduced costs arising from early adoption and accelerated deployment.
The UK Government’s Ten Point Plan and Hydrogen Town concepts are commendable but little interest was shown in supporting Stornoway as a Hydrogen Town when the Comhairle approached the Government. This is despite the fact that Stornoway could be a Hydrogen Town, through industry led innovation, years before the Policy’s end-of-decade target date.
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?
The viability of Hydrogen powered Heavy Goods Vehicles is still unproven although the Outer Hebrides are moving towards test deployment of a Hydrogen powered haulage truck. Building on the experience of Aberdeen and others, the deployment of Hydrogen buses should proceed at pace but the Government must support the roll-out of distributed Hydrogen Refuelling Stations (HRS) underpinned by reliable supply of Green Hydrogen.
Government resource should also be focused on building certainty for non-pipeline distribution of Hydrogen which will be essential in the rural context.
The new Hydrogen economy will have to underpinned by safe and reliable storage of Hydrogen. The Comhairle has discovered that the extent of Hydrogen storage required by gas network operators for adequate network resilience, particularly in the island setting, can represent a showstopper. The Comhairle has partnered with Technip FMC to trial a seabed Hydrogen storage concept which is not constrained by space or by above-ground COMAH safeguarding requirements. Again, the Comhairle and its partners are First Movers in this situation and will require Government support to combat the high costs of initial adoption and development.
What role should the oil and gas industry play in achieving a “just transition” to blue and green hydrogen in Scotland?
The Comhairle defers to its partners at the Net Zero Technology Centre in Aberdeen who are leading the way in the decarbonisation of Oil and Gas using Hydrogen.
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?
Hydrogen Skills Programmes should already be underway in Secondary School since students entering S3 in 2022 will graduate at ‘peak Hydrogen’ in 2030. This is something we are acutely aware of in the Outer Hebrides and the community benefit packages agreed with ScotWind partners attach some priority to this ‘New Energy Solutions’ skills pipeline.
The Government should support workers who are exiting a declining Oil and Gas industry to re-skill for the new Hydrogen economy. This will be relevant in the Outer Hebrides where Onshore and Offshore Wind components can be part-fabricated locally and seabed Hydrogen storage units will closely resemble Oil and Gas subsea infrastructure in their design, construction and installation. The Outer Hebrides have a high proportion of workers employed in the Oil and Gas industry all over the world and many of these workers will happily return to the islands to work in the new Hydrogen economy and to spend more time with their families.
Given the imminent demand for Green Ammonia as a ship fuel and Scotland’s unlimited capacity to produce Green Ammonia at scale from Offshore Wind, skills development in this sector should be accelerated. A 2019 DNV report forecast that Ammonia could make up 25% of the global maritime fuel mix by mid-Century with almost all newbuild ships running on Ammonia from 2044. The opportunities in this space are going to be huge and the UK Government really needs to take a leading position in growing this sector before the benefits are lost to European or Far East competitors. It means that this industry needs to develop quickly and intensively to deliver the sort of benefits that we, as islands, deserve. For too long, we have been passed over with all the focus on Orkney and Shetland where the possibilities are not even so strong. This is unacceptable. And needs to be addressed.
March 2022