Written evidence submitted by PA Consulting (HCC0048)

House of Commons Scottish Affairs Committee

Hydrogen and carbon capture in Scotland Inquiry

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

Scotland can uniquely combine plentiful water with large scale hydrogen production from its 25% of European offshore wind and 10% of tidal potential. The UK Government must capitalise on this global competitive advantage by using Scotland as a test bed to decarbonise heavy transport, meet climate goals and create a sustainable export market; for instance, by setting ambitious export targets to allow Scotland to lead the UK and Europe. This would require targeted policy support and funding for demand-side technologies and their supporting infrastructure, as well as the creation of the right regulatory mechanisms to enable export

Scotland's net zero targets rest on decarbonising heavy transport, requiring hydrogen.

• With its aim to achieve net zero by 2045 rather than 2050, Scotland's net zero target is 5 years ahead of the UK's.
• Unlike the rest of the UK, Scotland has a unique need for critical lifeline flight & ferry service to remote & island populations. These transport sectors are hard to abate and could contribute significantly to Scotland's carbon footprint if they are not decarbonised.
• If Scotland doesn't tackle its aviation emissions, they will constitute 40% of the nation's emissions by 2045. (Transport Scotland figures).  Scotland therefore cannot meet its net zero goal without switching heavy transport including sea and air by 2045 to cleaner fuels, such as hydrogen.

Scotland is arguably the best place in the world to produce green hydrogen.

• Scotland is unique, both in the UK and across Europe, in having access to large volumes of fresh water (90% of the UK's surface freshwater is in Scotland)[1], and significant sources of green electricity, the two essential ingredients for green hydrogen production. In fact 25% of European offshore wind and 10% of tidal capacity is located in Scotland[2].
• This makes Scotland better positioned than anywhere that has large solar capacity, but which is water constrained and requires water desalination facilities to produce hydrogen.
• Indeed, Scotland's combination of hydrogen production and plentiful water capacity arguably makes it the best place in the world to produce green hydrogen and a good candidate for exporting hydrogen to Europe.
• The UK Government must do all it can to capitalise on this global competitive advantage. 

Scotland's dependence on hydrogen to decarbonise and its global competitive production advantage make it the ideal UK test bed for developing low carbon industries.

• Scottish demand and production potential make us ideally placed to be the UK's test bed and early adopter of industrial hydrogen use; with the 'lessons learned' and experience from such a scale up engine providing the opportunity to smooth and de-risk the process of scaling up production UK wide.
• This is especially the case for heavy transportation (air, sea and land) and off-grid machines (e.g. forestry) where Scotland can either develop solutions and technology domestically for future export, or otherwise, hold back and wait till there are available imports from elsewhere.
• Scotland is the base for a lot of hydrogen demonstrator projects that are helping determine the role hydrogen can play in the future Scottish and UK energy systems.

-       Policy Recommendation: Scottish hydrogen demonstrator projects need to be supported with appropriate funding schemes to continue with the technology development pathway.

The UK Hydrogen Strategy should be supplemented with policies to enable Scotland to test, build and export hydrogen technologies and low-carbon industrial clusters.

• Both UK and Scottish Governments have set out individual ambitions for hydrogen production targets, although Scotland's ambitions on production & export are ahead of the UK's.
• The Scottish government through its hydrogen policy statement and draft action plan has outlined its support for development of the hydrogen economy and ambitions and actions to be implemented over a 5-year time timeframe.   
• The UK Hydrogen Strategy report calls out potential for hydrogen export from Scotland to Europe and rest of the UK, delivering jobs and economic benefits.

-       Policy Recommendation: the UK Hydrogen Strategy needs to be supported with appropriate policy and regulatory mechanisms to create and develop the Hydrogen Economy.

• The UK Hydrogen Strategy includes details on various policy initiatives and funding schemes, but it doesn’t detail how the UK government will work with the devolved administrations to support their individual ambitions.

-       Policy Recommendation: the UK Government should work with devolved administrations to establish and plan how each of their individual plans can be delivered. This should include considerations about how Green Freeports can be used to promote the hydrogen economy as part of their net zero conditionality.

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?

The UK Government must seize the opportunity to bring Scotland's unique engineering strengths across energy, aerospace and maritime together to unlock the rebirth of shipbuilding and aerospace, 'level up' Scottish regions, and develop sustainable export markets in the global fight to tackle climate change. Scotland's global potential requires infrastructure to meet demand within, as well as beyond our own shores. For instance, connections need to be made between Scottish production with Northern Irish storage, but also facilities to serve the "green ammonia gold rush" whose demand is leading nearby Rotterdam's search as far as Australia.

The UK Government can combine Scottish experience across energy, aerospace and maritime to create truly world-leading clusters.

• Other European countries with high wind resources similar to Scotland’s are focusing their hydrogen activities mainly on the supply side of the value chain (large scale green hydrogen production projects), driven by state-owned energy companies. Scotland does not have a similar structure to encourage this type of investment; which is why there is also merit in focusing governmental policy and investment activities on the demand side.
• More specifically, aviation and maritime sectors are promising areas for investment, with state-backed ferry companies and airports and a growing interest in hydrogen as a decarbonisation vector for these sectors.
• The key to unlocking Scotland's potential is to combine its unique and highly skilled engineering bases across energy, aerospace and maritime to unlock the re-birth of the (sustainable) ship building and aerospace industries. This could bring the Levelling Up desired by government and required by communities

The national shipbuilding strategy can be used to build sustainable ferries: first for Scotland and then for export.

• The potential here is to take the initiative of early adoption and develop the skills, expertise and reputation to once again design and build ships for exports from the Clyde.

-       Policy Recommendation: the UK Government should work with their Scottish counterparts within its National Shipbuilding Strategy to support industry to build sustainable ferries, first for Scotland and then for export. 

Scotland's aerospace sector should be given the support to create a hydrogen fleet whose knowledge and intellectual property can then be exported. 

• The use of hydrogen in aviation in particular is growing, with commitments in the space by major players like Airbus and GKN, as well as new entrants such as ZeroAvia, HyPoint and Universal Hydrogen.
• The first hydrogen developments in aviation and maritime transport are likely to be small-to medium scale and focused on regional transport. Scottish companies such as Logan Air are well-placed in this space and should be given the required support to deliver an early roll-out of a hydrogen fleet.
• ZeroAvia has already been involved in multiple test flights using its Hydrogen Fuel Cell Powertrain and has plans to undertake a test flight between London and Rotterdam by 2024 using its Hydrogen electric technology. Companies like Zero Avia and Logan Air need to be encouraged so that they can take a leading position and offer early trial opportunities, especially in Scotland given the geography and hard to reach areas.
• With the right support, Scotland could be one of the first such movers in hydrogen aviation. By keeping as much of the design and delivery as possible within Scotland, the country can capitalise this advantage to become a knowledge and technology exporter.
• Moving beyond sub-regional hydrogen flight would require liquid hydrogen aviation. Scotland has some of the world's leading cryogenics experts at the University of Strathclyde and tapping into this resource with the domestic aerospace industry provides Scotland with the opportunity to develop knowledge and intellectual property which can also be exported.
• E-fuels, which can be produced from hydrogen and CO2, are also experiencing growing interest from the aviation industry. The Nordics are increasingly active in this space, and Scotland will risk falling behind and not exploiting its competitive advantages in the hydrogen space if the development of low carbon aviation in Scotland is not adequately supported.

-       Policy Recommendation: The UK Government should provide the support required to move beyond sub-regional flight. This will require liquid hydrogen. Investing now in liquid hydrogen test facilities could capture Scotland's global advantage.

-       Policy Recommendation: Relatedly, the UK Government should provide incentives to ensure Scotland does not let the Nordics and Netherlands overtake Scotland in e-fuels and cryogenics.

The Scottish distillery industry can be a first mover in hydrogen adoption

• In addition to maritime and aerospace sectors, there is vast potential also to develop early adopter segments (e.g. Distilleries) which have already expressed interest in switching to hydrogen and reducing their reliance on gas within their operations.
• The distillery industry offers a first mover advantage with ten distilleries across Scotland already expressing interest in working with hydrogen as part of their decarbonisation plans. Distilleries – the majority of which are located off-grid in Scotland and rely on importing oil, making decarbonisation difficult - are one of the major energy consumers in the food and drink industry. The majority of this comes from distilleries' natural gas usage (up to 90%), which is used for heating during the distillation process. The carbon footprint of the industry could be significantly reduced by switching to hydrogen.  More specifically, the Scotch Whisky industry has launched a new Sustainability Strategy which commits the sector to reaching net-zero emissions in its operations by 2040 and to reducing dramatically the environmental impact whisky. 

Support is required to realise Scotland's global competitive advantage as an exporter of hydrogen.

• As stated in Section 1, Scotland is unique in being able to both produce green hydrogen at scale, given the country has 25% of European offshore wind and 10% tidal capacity, and access to significant volumes of water. The UK Government must do all it can to capitalise on this global competitive advantage
• As demand within Scotland will be limited with main demand centres located in England and Wales (see Figure 1), Scotland should be used as the test bed for trials/demonstrator projects to export hydrogen to the rest of the UK and Europe.

-       Policy Recommendation: This needs to be supported by favourable policy and regulatory initiatives as well as investment in the required interconnectors.

With Rotterdam looking as far as Australia to source its green ammonia, this new 'gold rush' should be exploited to develop a sustainable Scottish export market. Storage and export facilities should be built to support this.

• In addition to hydrogen, Scotland should be the natural leader in the exports of green ammonia.
• The industry is using the term "green ammonia gold rush" and the Port of Rotterdam (which imports 14% of EU energy) is going as far as the Middle East and Australia to source green ammonia for import as they cannot find it closer to home. 
• We are aware of projects in Canada looking to export green ammonia to Europe to capitalise on their shorter transport distances to Europe (and reduced transport costs) compared to projects in the Middle East or Australia.
• With Scotland far closer to continental Europe than any of the above geographies, the UK Government should seize the opportunity to make Scotland a green ammonia exporter.
• The case above for Scotland being a leading source of green ammonia is strong. Delivering Scotland's potential would require assets to store and export green ammonia to Europe

-       Policy Recommendation: The UK Government should provide support to deliver refuelling, bunkering and green ammonia storage infrastructure at ports & airports. These could be tied in with the Green Freeport programme whose winning bids are soon to be announced.

To allow for a wider take-up of Scottish hydrogen, Scotland's enormous potential offshore hydrogen resources should be connected to major demand centres across the UK to deliver decarbonisation and allow for the development of new industries. 

• Centralised offshore hydrogen production will require the necessary distribution infrastructure (pipelines/storage/tube trailers) to allow it to cater to demand both across larger dispersed sites within Scotland (such as ports and airports) and high-volume demand centres across the UK and beyond (e.g. for export). Technological developments to support hydrogen distribution is therefore needed.
• Investments can also be made to repurpose existing pipeline infrastructure to make it compatible with hydrogen blends in the future. The move towards hydrogen should take advantage of the existing infrastructure and capabilities within existing sectors (for instance, oil & gas, marine, renewables, chemicals) where possible.
• Given the nascency of hydrogen market, most technologies are still in their early development phase. Ensuring efficient uptake of hydrogen needs investment in the infrastructure required to scale from Demonstrators to commercial adoption. That requires test bed facilities and assess such as those outlined by Fly Zero.

Scottish production capacity can be combined with capacity in Northern Ireland to deliver economic opportunity across the entire UK and mitigate curtailment of Scottish offshore wind.  

• Hydrogen production and storage Infrastructure can also deliver curtailment mitigation for the offshore wind sector and therefore contribute to increase the utilisation of renewable energy assets.
• The limited geological storage resources in Scotland imply that distribution networks and purpose-built storage will be important.

-       Policy Recommendation: In addition to supporting purpose-built storage in Scotland, the UK  government should support hydrogen production on the west of Scotland to be combined with storage resources such as salt caverns in Northern Ireland as shown on the map below.

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?

Scotland's heavy transport and buses would benefit from investment in a decentralised production infrastructure to minimise distribution costs to a disperse, low-volume offtake. As many heavy transport segments are back-to-base, this should be rolled out in a strategic way to maximise refuelling utilisation.

To minimise distribution costs, heavy transport would benefit from decentralised production infrastructure.

• Hydrogen trials are ongoing in back-to-base transport segments (such as buses and RCVs). This can set the foundations for future transport hubs with the right supporting infrastructure (pipelines, storage, refuelling stations).
• Decentralised green hydrogen production should be developed for use in heavy road and rail transport. This should include distributed electrolysers co-located with hydrogen refuelling stations (HRS) and transport hubs to minimise hydrogen distribution costs.
• Roll out of such distributed generation and refuelling should be strategic to maximise utilisation and optimise costs. This makes distributed hydrogen production and refuelling particularly suited for back-to-base transport like buses and RCVs, as well as high frequency routes.
   

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

Scotland's ambition to be net zero by 2045 rests upon tackling heavy transport emissions. Scotland can only rise to that challenge - and export the knowledge, skills and resources to deliver global solutions - by combining expertise across the entire economy.

The oil and gas sector should be central to the just transition, since Scotland can only rise to the challenge by combining expertise across the entire economy.

• The transition away from oil & gas towards a low carbon hydrogen economy in Scotland needs to include the oil & gas industry as a significant skills hub, with excellent transferability and upskilling potential for a low carbon economy (for instance, in refuelling logistics and networks and offshore engineering).
• The existing skillsets in the Scottish energy and oil & gas sectors are ideally positioned to be repurposed for the hydrogen economy. For instance, existing workforce skills in engineering and manufacturing could be required by electrolyser manufacturers. For these roles there will be transferability from other engineering-focused fields such as the oil and gas industry. Transferability is also clear in offshore applications, networks and refuelling, and geological hydrogen storage.
• The renewable electricity feedstock gives Scotland a strategic advantage, which can only be fully realised if it also captures the knowledge and technological know-how to bring down the cost of production and increase efficiency. This means that proper processes will need to be put in place to capture the skills and knowledge already existing in this space as well as those gained through learning by doing, and share these through well-structured knowledge sharing processes.

Greater policy certainty and support can help oil and gas companies make the decision to contribute to Scotland's hydrogen economy.

• Oil & Gas companies will have to consider where in the hydrogen economy they are best able to operate, which role they should take and the extent to which they wish to diversify their existing business. Decision-making can be enabled by more certainty around hydrogen business models and government policies.

-       Policy Recommendation: The UK Government should work with industry to understand the requirements for and then deliver the policy certainty needed for firms to transition to hydrogen.

The oil and gas industry should ensure that its activities are in line with the principles of a just transition.

• The industry should ensure that workers and communities impacted by an oil and gas phase-out are included in consultation when transition solutions are generated. This should be done in a structured, transparent way, with outcomes integrated in any policy development
• For instance, guaranteed training in line with workers’ needs could be provided.

-       Policy Recommendation: The UK and Scottish Governments should encourage engagement between the oil and gas sector and workers as the industry transitions by developing frameworks and coordinating, support or mandating their implementation as appropriate.

Figure 1- Map of future hydrogen demand centres and relevant resources for hydrogen generation and storage

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?

Scotland is the most educated country in Europe, with a world leading engineering base as well as some of the world's foremost academics in critical areas. Above and beyond training, the best way to create a sustainable workforce is to invest now in a world-leading sector across energy and transport to satisfy long-term domestic and intranational demand.

The UK and Scottish Governments should work with industry to map the skills gaps needing filled to maximise the country's hydrogen potential.

• Highly skilled workers are likely to be needed especially within mechanical engineering and chemical engineering. Skills shortages in these areas must be addressed. Such skills are highly applicable in many areas, and are therefore a low-risk development investment option. Specific/more niche skills gaps within these areas should be identified by engaging with players in the hydrogen space and matching their skills requirement with the existing resources in Scotland.
• Current specific gaps in resources, capabilities and technologies are still unclear. These need to be identified to establish how well Scotland can be placed to address these gaps and where it can take a leading role in the hydrogen economy.
• The oil and gas industry should be actively involved in identifying the skills required to accelerate blue and green hydrogen in Scotland, and map its own workforce skillsets against future needs so that redeployment opportunities can be identified, and gaps in skillsets ascertained and then addressed through targeted training programmes.

-       Policy Recommendation: The UK Government should work with the Scottish Government and industry to map existing skills against expected future requirements.

-       Policy Recommendation: Policy should not incentivise the expansion of blue hydrogen outside of the petrochemical industry. Given current gas prices, the cost advantage of blue hydrogen is now diminished and with it some of the weight of the argument in favour of supporting the technology. 

-       Policy Recommendation: Additional training should include all aspects around hydrogen safety, and properties which impact handling and conversion.

• Scotland also needs to enable and support end-use of hydrogen in Scotland to ensure long-term offtake and viability. Therefore skills development should not only focus on hydrogen production and transport, but should also include supporting training and development for workers in likely offtake sectors such as maritime and aviation to avoid future bottlenecks. Engagement with such sectors is therefore recommended
• The hydrogen economy will also require skills in data analysis and computing, to ensure a modern, efficient economy. A lack of such skills could potentially slow down development. 

-       Policy Recommendation: The UK and Scottish Governments work with industry to ensure adequate training across hydrogen production, transport and end use as well as in areas such as data analysis and computing.

The best way to create a sustainable workforce is to invest now in a world-leading sector across energy and transport to satisfy long-term domestic and intranational demand.

• Scotland has the demand as well as the production capacity to lead the hydrogen economy. Indeed, the country's leadership during the last Industrial Revolution, and the carbon legacy that left, means Scotland has a duty to do all it can to lead efforts to decarbonise.
• The key to unlocking Scotland's potential is to combine the country's unique and highly skilled engineering bases across energy, aerospace and maritime to unlock to re-birth of the (sustainable) ship building and aerospace industries. In addition to these sectors, there is vast potential to export hydrogen as well as green ammonia further afield and also develop early adopter segments such as distilleries.
• This could bring the Levelling Up desired by government and required by communities.
• The sector now needs the bold policy support and certainty required to make that a reality.

June 2022

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