Written evidence submitted by SSE (HCC0027)

Hydrogen and carbon capture in Scotland

About SSE

Headquartered in Scotland, SSE is a leading generator of renewable electricity in the UK and Ireland and one of the largest electricity network companies in the UK. SSE develops, owns, and operates low carbon infrastructure to support the zero-carbon transition. This includes onshore and offshore wind, hydropower, electricity transmission and distribution grids, efficient gas, alongside providing energy products and services for businesses.

Within Scotland, SSE Renewables is currently building the largest offshore wind in Scotland, the 1.075GW Seagreen windfarm and developing a larger offshore wind farm, the 4.1GW Berwick Bank. SSE Thermal operates Scotland’s only major thermal power station at Peterhead. Whilst this response relates to SSE’s generation businesses, SSE’s network businesses, Scottish and Southern Electricity Networks (SSEN) owns and operates the electricity transmission and distribution networks in the north of Scotland.

We wanted to take the opportunity to highlight the importance of key areas to be considered as part of the enquiry given our planned CCS and hydrogen activities in Scotland.

Response to questions

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

• There is a risk that hydrogen production business models or demand de-risk mechanisms that are UK policy mechanisms set out by BEIS may act as barrier for Scottish projects, even if any direct cost taxpayer support is to be provided by the Scottish Government. Across GB and UK policy mechanisms, there is a need to ensure they unlock devolved administration ambition rather than act as a blocker.

• We also note the analysis carried out by Hydrogen UK showing 5.8-20.7GW hydrogen production output by 2030 based on known projects, with demand ranging from 40-161TWh, which suggests the 5GW production ambition by 2030 from UK government could be more ambitious.

• There is a potential issue in electricity network plans regulated by Ofgem, which presents a barrier to offshore wind deployment in Scotland through limited projects that can get a connection to the electricity transmission network, or at least incurring a more expensive grid connection and usage cost.

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?

• With its abundant renewable energy resources, Scotland has the potential to produce a significant volume of green hydrogen at a competitive price. To unlock this potential, infrastructure to store and export this energy will be required. In particular, there is a need to ensure the North of Scotland is connected to the industrial clusters in the central belt of Scotland and the North of England via a pipeline to support green hydrogen can be cost effectively exported from Scotland. Similarly there is a need to ensure that Scotland can help support export of green hydrogen from Northern Ireland as well as Ireland through the gas infrastructure that connects the island of Ireland to Great Britain and the Continent via Moffat in Scotland.

• The hydrogen energy hubs proposed by Scottish Government should also be supported by UK Government. In particular, decentralised Hydrogen Hubs can help utilise Scotland’s significant renewables resource, deploy early electrolyser capacity to help secure a domestic supply chain whilst contributing to driving down technology costs and provide economic opportunities across Scotland, all while driving real world emissions reductions. In time these can be connected to each other and to hydrogen infrastructure on the east coast to enable export further down to the rest of Great Britain and beyond. To develop long-term demand regions where hydrogen hubs are placed should be focused on long lasting projects so a hydrogen economy can be sustainably built around these projects attracting new demand. Co-locating these initial hubs at onshore wind farms would help reduce the costs of hydrogen and electricity through optimising the use of the wind farm’s grid connection. SSE Renewables is exploring opportunities for early projects for an initial decentralised Hydrogen Hub in the Highlands which could be replicated elsewhere, and has focussed on developing an electrolyser project co-located at Gordonbush Wind farm in Sutherland. A decentralised Hydrogen Hub based at Gordonbush will help facilitate a hydrogen economy in the area with multiple known potential offtakers to anchor initial demand including hydrogen for transport, distilleries, Wick Airport, Wick Harbour, and the isolated gas networks known as Statutory Independent Undertakings (SIUs) at Thurso and Wick.

• The deployment of CCUS infrastructure is of critical importance to the delivery of net zero in Scotland, and the rest of the UK and elsewhere through a CO2 import hub at Peterhead-St Fergus. Such a hub will support the deployment of hydrogen down the east coast of Scotland into the central belt and beyond. Peterhead Carbon Capture Power Station, being jointly developed by SSE Thermal and Equinor, is ideally positioned to connect into the shared infrastructure being developed through the Scottish Cluster, which will also support an emerging low-carbon hydrogen economy. Whilst green hydrogen will be a long term importance to Scotland and the rest of the UK., the UK government’s initial focus should be on supporting deploying CCUS and hydrogen infrastructure in the North East of Scotland. The CO2 import infrastructure between St Fergus and the deep water port at Peterhead will be critical for the decarbonisation of industrial clusters in the UK, which do not have access to CO2 stores and the most economic form of bulk low carbon hydrogen for at the next decade before costs of green hydrogen and its production volume scales. Power CCS projects can underpin CCUS and hydrogen infrastructure investment in industrial clusters by providing an anchor load reducing any taxpayer support required and reducing usage costs for other infrastructure users. The technology is ready and the business model is well developed. Power CCS projects can be deployed quickly (by 2027), providing an ‘anchor load’ for shared CO2 infrastructure.

• There is a need for more than one Power-CCS project this decade, to ensure sufficient low-carbon, flexible and dispatchable power to back up a low-carbon system. Around 12GW of coal and nuclear capacity will drop off the system before the end of the decade, potentially alongside some aging gas capacity. Investing in one Power-CCS project this decade will only provide between 700-800MW. Power CCS can displace more carbon intensive generation. This project would decarbonise Scotland’s only major thermal power generation site, accelerating the transition to net zero by backing up renewable energy with flexible, low-carbon power, as well as supporting wider industrial decarbonisation by underpinning investment in shared infrastructure. It is imperative that UK Government allows the Scottish Cluster to develop at pace in order to build a hydrogen economy in the region.

• Hydrogen power generation could be a potential early anchor for large scale low carbon hydrogen demand, so there is an opportunity for investment in this space from UK Government. Hydrogen provides a low carbon alternative to fossil fuels and this should be emphasised as a clear, viable route for electricity generation. As set out in the UK Hydrogen Strategy, electricity will be the second-largest demand sector for low carbon hydrogen this decade, behind industry. Thus, there is a need for increased low-carbon flexible generation this decade to support a net zero power system based around renewable energy. We also note Scottish Government’s plan to explore the options hydrogen will play in direct power generation in the Scottish Government’s “Update to the Climate Change Plan: 2018-2032”; hydrogen and CCS will be needed to provide low-carbon, flexible, dispatchable power to back up renewable generation.

• Hydrogen storage will be key to unlocking the hydrogen economy as it is intrinsically linked to the production of hydrogen and used to smooth imbalance between supply and demand. In order to help the Scottish Government reach its 5GW hydrogen production ambition by 2030, large-scale storage will be required to store hydrogen so Scotland can become less reliant on fossil fuels for dispatchable energy on a pathway to net zero. Storage will be particularly important in managing periods of excess energy and deficit in response to demand as long duration storage will be required to store excess energy from an increasing amount of renewables providing generation capacity, with 38GW storage (including hydropower, batteries etc.) required to redistribute excess renewable energy in 2035. Given the long lead times for large-scale storage assets, and the important role they will play in achieving hydrogen production ambitions and system flexibility, we would encourage greater investment in this area.

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

• The hydrogen business model as proposed as part of the UK Hydrogen Strategy should be implemented, and importantly, this should be done as soon as is practicably possible so as not to delay projects and maintain momentum in the sector. For green hydrogen production to maximize the benefits this should be coupled with targeted demand support around emerging decentralised hydrogen hubs, such as capital support to convert local infrastructure over to hydrogen, such as heavy road vehicles in corporate and public fleets, buses, trains or ships.

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?

• Initially on-shore site could be coupled with nearby production at onshore wind farms, and pipelines to connect decentralised hydrogen hubs, but in the longer term more significant storage and export infrastructure will be required.

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

• Re-purposing thermal generators for a net-zero world – The UK’s Climate Change Committee outlines an important role for gas generation with CCS and hydrogen powered generation to 2050. SSE’s existing fleet of generators are located in places of strategic industrial importance in both the UK and Ireland. While SSE believes there is no role for unabated gas generation in the long run, we believe that there will be economic opportunities to provide flexible, decarbonised electricity by deploying shared CO2 transport and storage infrastructure and hydrogen networks within industrial clusters. The skills and knowledge of the people who currently work in existing assets will be of significant value as assets could be transformed to low-carbon thermal.

• Promote further industrial development – SSE recognises that the sites hosting our industrial assets have current and future economic value that support vibrant local economies and their communities. We recognise that in the transition to net zero, our ability to re-develop sites as low-carbon thermal generation will depend on the rollout of CO2 and hydrogen infrastructure as well as market signals. On this basis, sites may have potential for re-powering in the short- or medium-term, and in this case organisations (as well as SSE) should look to evaluate future electricity generation opportunities and the land needed for future development options. The remaining portion of sites may see their primary use change and can provide opportunity for further economic development.

• Remove requirement for specific industry experience in job adverts (unless necessary) and actively welcome people with transferable skills.

• Review opportunities to move to strength-based (rather than experiential/education) recruitment criteria.

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?

• Develop a common ‘all-energy’ framework for the key skills needed for a hydrogen/low-carbon career.

• Develop a skills assessment framework to promote identification and portability of common skills and certifications.

• Assess the value of a common industry ‘mark’ for roles open to transferable skills, similar to the ‘Happy to talk flexible working’ mark.

• Create resources, guidance and signposting for new skills needed for a low-carbon career, acknowledging the wide ranging roles, beyond technical positions, available.

March 2022