Written evidence submitted by Offshore Renewable Energy Catapult (HCC0030)

Dear Sir / Madam

Scottish Affairs Committee: Hydrogen and carbon capture in Scotland

I am writing to provide written evidence to the Committee’s inquiry on Hydrogen and Carbon Capture in Scotland.

The Offshore Renewable Energy Catapult is the UK’s leading technology innovation and research centre for offshore renewable energy. We play a key role in delivering the UK’s net zero targets by accelerating the creation and growth of UK companies in the offshore renewable energy sector. We use our unique facilities and research and engineering capabilities to bring together industry and academia and drive innovation in renewable energy.

Please see our response to several of the questions presented in the committee’s Call for Evidence. 

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?

Our report on Solving the Integration Challenge, with the Offshore Wind Industry Council, identified the potential for Scotland to supply not only UK energy needs via green hydrogen, but to also sustain an export market of up to £40 billion annually. The recent Scotwind auction round reached 25GW of potential offshore wind development, indicating that UK and global energy majors are also targeting the scale of market we identified. Offshore wind is unique in terms of the very large scale of hydrogen generation that is possible, relative to other renewables, at low cost. The research agenda should prioritise floating offshore wind technologies, offshoring and marinisation of electrolysers and control and integration of electrolysers with offshore wind turbines and windfarms as well as marinization of associated storage and distribution technology, such as: compression; liquefaction; Liquid Organic Hydrogen Carriers (LOHC) technology; offshore bunkering; windfarm to shore piping; windfarm to shore liquid H2 distribution barges / tanker vessels; and, associate port-based infrastructure for receiving compressed / Liquid H2 from offshore wind production sites.

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

Many potential users of hydrogen are exclusively motivated by the opportunity to use green hydrogen, i.e hydrogen generated from renewable energy sources. All market incentives should therefore clearly differentiate between green hydrogen from renewables, and hydrogen derived from other energy sources. In addition, the largest and most effective market incentive for renewable electricity was the range of transmission grid take-or-pay contracts provided via Feed in Tariffs (FiTs), Renewables Obligation Certificates (ROCs) and Contracts for Difference (CfDs).

A similar scheme to enable the national gas grid to take green hydrogen would likely be equally effective in encouraging investment in generation of green hydrogen. A similar scheme to the Levy Control Framework for renewables would allow for a series of auctions to encourage large scale green hydrogen investments.

Such a scheme could also reserve some of its budget in order to provide ‘back-stop’ CfD contracts to green hydrogen projects intended to serve off-takers whose demand drops away, e.g. a transportation hub. This would greatly strengthen the investment case for ‘green hydrogen commercial PPAs’, and allow a greater role for private sector projects, earlier in the development of the sector than was the case for renewable electricity, where large-scale commercial PPAs did not emerge until long after the establishment of schemes for grid-connected projects.

Blue hydrogen has already been incentivised at large scale via the support for industrial decarbonisation clusters. Our proposal for incentives for gas grid connection for green hydrogen would level the playing field by providing green hydrogen with its own publicly-underwritten, large scale market.

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?

Whilst the question refers specifically to buses, we hope that the term ‘heavy transport’ can be understood to include Maritime transport as well. If so, then we would like to draw the following points to the attention of the Committee:

• Transport decarbonisation is a major challenge in achieving net zero, and one that Scotland can make a major contribution to solving;
• Maritime accounts for 3% of global CO2 emissions globally;
• Hydrogen has the potential to play a significant role in the future fuel mix for maritime as the industry seeks to decarbonise
• The offshore wind industry has a significant, arguably essential, role to play in supporting the transition to clean maritime in the UK;
• The offshore wind industry is heavily reliant on maritime logistics at all stages of a windfarm’s lifecycle, including 25 years of operational maritime logistics;
• The offshore wind industry is uniquely placed as an industry to be both a producer and an end user of green hydrogen as a zero maritime fuel;
• There is evidence to suggest that the offshore wind industry has an intent to be a first adopter of innovative technologies to enable clean maritime operations.
• Working in partnership with the DfT, the Workboat Association and industry, the ORE Catapult has produced research on the barriers and opportunities for decarbonising North Sea offshore wind maritime operations: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1000153/decarbonising-maritime-operations-in-north-sea-offshore-wind-o-and-m.pdf
• Working in partnership with the DfT, the supply chain and industry, the ORE Catapult was instrumental in convening partners for the signing of the ‘Operation Zero’ declaration during COP26 in Glasgow. The vision of Operation Zero is for zero-emission operations and maintenance vessels to be deployed in the region by 2025.

The declaration was signed by the initial cohort of more than 20 industry members on 9 November 2021. It outlines the potential for the offshore wind industry to be a first mover, the group’s mission statement and ambitions, and the pledges of members to work together to decarbonise these vessels.

https://www.gov.uk/government/publications/cop26-declaration-shipping-and-offshore-wind-operation-zero

• Based on known deployment of offshore wind farms in Europe, ORE Catapult estimates that 1,400 new vessels will need to be built between now and 2050 just for operations and maintenance (O&M), including more than 300 Service Operations Vessels (~90m vessels providing accommodation and warehousing for 14 day rotation maintenance cycles).
• The short-sea nature of these logistics, with a single port of operation for a long charter duration (typically around 10 years) means that the profile of the vessel operation is well suited to H2 as a fuel type (particularly Liquid H2 or LOHC).
• Infrastructure is a challenge though, with many port, vessel and windfarm operators often describing the ‘chicken and egg’ barrier, wherein vessel operators or charterers are unable to select H2 fuel type vessels because of a lack of infrastructure, whilst port operators are unable to invest in infrastructure in the absence of guaranteed offtake.
• Investment in port infrastructure for the bunkering of H2 fuel is important, with incentive measures required to help address the ‘chicken and egg’ barrier and encourage investment in both production assets as well as associated storage and distribution infrastructure;
• Meanwhile, ports also have an opportunity to serve as production hubs for maritime H2 fuel, aggregating demand from multiple maritime operators as well as inland transport operators who could also make use of such facilities. In order to enable ports to invest in such infrastructure, electrical grid constraints may also need to be overcome given the high levels of power feed required to operate large scale electrolysis plant.
• There is a huge opportunity for the UK and Scotland to become industry leaders for the emerging clean maritime market, with a significant emphasis on the role of H2 in maritime (for H2 as a fuel in both Fuel Cell and Internal Combustion Engine propulsion systems). This offers huge potential for economic growth, job creation and export in sectors such as naval architecture, ship building, alternative fuel production and supply, legal, financial, classification and other professional services. 

I trust that the information included above is of interest.

Needless to say, if we can be of further help, the organisation would be very happy to provide oral evidence at any future committee hearing or to work with the committee secretariat to provide clarification on any of the points raised above.

Yours sincerely,

Stuart Barnes

Head of Government Affairs

Offshore Renewable Energy Catapult

March 2022