Written evidence submitted by Comhairle nan Eilean Siar, Local Authority for the Outer Hebrides of Scotland (HCC0054)

UK PARLIAMENT SCOTTISH AFFAIRS COMMITTEE

HYDROGEN AND CARBON CAPTURE IN SCOTLAND INQUIRY

Submitted by Comhairle nan Eilean Siar, Local Authority for the Outer Hebrides of Scotland

What lessons can be learned across Scotland and the UK from the way Comhairle nan Eilean Siar has approached green hydrogen development?

You stated in your written evidence that the UK Government needs to support green hydrogen development and early adopters. What specifically do you think the UK Government should prioritise when it comes to storage of hydrogen? Do you think the storage of hydrogen should be a national asset?

The key challenge facing a Hebridean Hydrogen Economy is the cost differential between Liquid Petroleum Gas and Green Hydrogen.  SGN will not proceed with network conversion unless there is no additional cost to the customer.  It is clear that, at the moment, the cost of Green Hydrogen is significantly higher than the cost of LPG / LNG.  This cost gap will close as carbon is taxed upwards and as the cost of Green Hydrogen falls through technological advances and economies of scale in production.  Until then, we call on the UK Government to step in to help close that gap through some sort of supported cost guarantee for Green Hydrogen and we’d be happy for the proposed Stornoway Town Centre Propane Network conversion project to serve as a Pathfinder for the UK in terms of small town gas conversions.  The support of Government in closing the cost gap will be essential for these early adopters.

Specifically on Hydrogen storage, the amount of overland storage required to provide LPG / LNG resilience for an island gas network is considerable.  With this volume of storage, there are visual impact and COMAH (Control of Major Accident Hazards) implications.  In view of these constraints, we are working with partner, Technip FMC, on an innovative seabed Hydrogen storage solution.  This will be deployed at the Energy Hub and we feel that, again, this is the sort of early adopter, pathfinder project that Government should be supporting until it is commercially viable.

We do not feel that the storage of Hydrogen should be a national asset, particularly since the islands have no existing reservoirs for storage in the form of empty gas fields or natural caverns.  The islands will have to develop their own storage solutions with partners like Techip FMC (subsea storage modules) and the UK Government should be ready to support innovative storage measures with first adopter grant funding.

What incentives need to be in place from the UK and Scottish Governments to ensure that infrastructure is in place at the right time to support the export of green hydrogen?

The main market for Hydrogen exported from the UK seems to be Germany.  It will be possible over time to use re-purposed North Sea Oil & Gas pipelines, and new pipelines, for the direct export of Hydrogen gas to Germany from East Coast facilities.  Thought should be given to the provision of an interconnected subsea Hydrogen ‘backbone’ down the west coast of the UK, picking up Irish Sea production, future ScotWind production North West of Scotland and Hydrogen production in the Outer Hebrides, Orkney and Shetland.  Until then, the islands do not have the benefit of a pipeline and it is not possible to export Hydrogen gas except in liquefied form, frozen to minus 253 degrees Celsius.  The market for the islands will therefore be for the export of Hydrogen derivatives like Ammonia and Methanol.  We’ve been told that all new ships built across the world from 2045 will run on Ammonia so the potential market is huge.  We’d like to see both Governments profile Scotland’s Hydrogen potential as piped Hydrogen on the East Coast and ship-borne Ammonia on the West Coast with a clear strategy for investing in facilities accordingly.

In your written evidence you state that you are looking to have SGNs Stornoway Town Centre Gas Network running on 100% hydrogen in 2027. How confident are you that this can be achieved? What do you need in place from the UK Government for this target to be met?

Barring any red flags in SGN’s H100 Hydrogen-for-Heat project in Levenmouth, Fife, we see no reason why conversion of SGN’s Stornoway Town Centre Propane Network should not take place.  Discussions are at an advanced stage with the renewable electricity supplier, the main Hydrogen production partner and offtake interests.  Landowner interests are aligned and a strong portfolio of demand is being compiled.  Grid delays can be circumvented by the private wire connection of shared ownership generation from a Wind Farm which is already consented.  All associated agreements are in place.  Government could support the process by addressing the cost gap between Green Hydrogen and LPG / LPG and by funding the development of concepts like Technip FMC’s sea bed Hydrogen storage system.  The development of local export facilities for Hydrogen / Ammonia is an another area the Government should be looking at in order to accelerate UK decarbonisation.

How much do you think local hydrogen production will affect fuel poverty on the islands?

The technology behind household Hydrogen Boilers is not yet fully mature but, once it is, Fuel Poverty can be eliminated in the islands as a not-for-profit supplier delivers Hydrogen manufactured from community owned generation to island customers.  No Grid costs, no shareholder dividends for large energy company, no volatile electricity market and no costs for transporting product around the UK.  The indicative delivery timeline for Hebridean Hydrogen will be: a) pilot scale electrolysis (<10MW) for local demand in Local Authority fleet, Seaweed processing, pharmaceuticals, distillation etc by 2024/25; b) conversion of SGN’s Stornoway Town Centre Propane Network (circa 40MW) by 2027; c) provision of Hydrogen Fuel Cells to run household and business electric heating boilers island wide by 2027/28; d) supply of bottled Hydrogen for household Hydrogen boilers by 2028/29; and, export of Green Hydrogen or its derivatives by 2030 onwards.  So Hydrogen will address the Fuel Poverty issues around the provision of heat in homes while shared ownership in Onshore Wind will allow a local, not-for-profit electricity supply company to retail electricity from community-owned Wind Farms to island consumers with no shareholder dividend, no profit driver and no Grid costs.  Providing OFGEM allow this arrangement, we anticipate the combined heat and electricity costs for island households to be a fraction of what they are in 2022.

Are you confident that a link to the national grid will emerge by 2027? What barriers are there to this happening?

Not confident due to mixed messages from OFGEM and lukewarm commitment from SSEN Transmission.

At 0700 on 6 July 2022, BEIS announced that a Contract for Difference (CfD) had been awarded to Stornoway Wind Farm.  In 2019, OFGEM ruled that the planned 600MW Transmission Link between Beauly, Highland and Arnish, Western Isles would be authorised for construction if both Uisenis Wind Farm and Stornoway Wind Farm secured a CfD.  Uisenis Wind Farm were already in possession of a CfD from Allocation Round 3 in 2019 so success for Stornoway Wind Farm in Allocation Round 4 discharged OFGEM’s condition and finally unlocked construction of the 600MW Transmission Link following a 15 year wait.

Then, at 1200 on the same day, 6 July 2022, National Grid’s Offshore Transmission Network Review (OTNR) released their Holistic Network Design (HND) for the connection of 10.3GW of ScotWind Offshore Wind generation by 2030.  The HND recommended the provision of a single 1,800MW Transmission Link between Beauly, Highland and Arnish, Western Isles by 2030 and this encouraged SSEN Transmission to abandon delivery of the planned 600MW Transmission Link by 2027.

At that point, we thought that 420MW of Onshore Wind generation and 1,335MW of ScotWind Offshore Wind generation would be connected to Grid until 2030 through the new 1.8GW Transmission Link.  And, for the first time, there was some real certainty around the Link because the proposed 1.8GW Link formed part of a national infrastructure programme and did not place island connection at the whim of the regional Transmission Owner.  This timeline suited our ScotWind Offshore Wind developers as their scheduled deployment point is around 2030.  However, a delay to 2030 threatened the viability of our Onshore Wind Farms, particularly since the CfD’s secured by these Wind Farms will expire in 2027.  However, our Onshore Wind partners seemed relatively content with 2030 connection because there was certainty around the proposed 1.8GW Link (National Infrastructure as opposed to Strategic Regional Works not requiring a Needs Case, Cost Benefit Analysis or evidence of developer commitment; the very things that had held up delivery of the 600MW Transmission Link for 15 years).

On 8 August 2022, OFGEM published its Consultation on Accelerating Onshore Electricity Transmission Investment, effectively the vehicle to deliver HND recommendations by 2030.  We were alarmed to see that the 1.8GW Transmission Link recommended by the HND had been omitted from OFGEM’s list of accelerated investments (for 2030), reportedly because the 1.8GW Link did not appear in both the HND and National Grid’s Network Options Assessment (NOA) 7 Refresh.  Effectively, the HND proposes Offshore infrastructure while the NOA proposes related Onshore infrastructure and we are totally at a loss as to why our nationally significant 1.8GW Transmission Link has been omitted from the NOA 7 Refresh.  SSEN seem unable to answer the question, why does the 1.8GW Western Isles Transmission Link appear in the NOA 7 Refresh?

SSEN claim OFGEM have made a mistake and that the 1.8GW link will be placed on the list at the end of OFGEM’s consultation in December but we have spoken to OFGEM and we’re not so sure.  If the new link does not appear in OFGEM’s final list of accelerated investments, we are back to relying on a Large Onshore Transmission Investment (LOTI) re-opener process which places us at the mercy of SSEN who will have to prepare a Needs Case, a Cost Benefit Analysis and an assessment of developer commitment before OFGEM will authorise the link.  These are the very requirements that have held up the 600MW cable for 15 years so we are no longer confident that any cable of any size will ever be constructed to the Western Isles.  It may be that SSEN’s underlying preference is for connection of ‘Hebridean’ ScotWind Areas N2, N3 and N4 to Dounreay in 2033.

Loss of 1.8GW of connection through the islands means loss of ScotWind landfall and loss of all the benefits associated with landfall of electricity in the islands.  Community Benefit goes beyond direct Supply Chain Benefit and reflects a productive partnership between developer and community.  The obligation on developers to provide community benefit (largely voluntary) is based on where there is landfall of power and significant onshore infrastructure to transmit that power to market.  The islands would therefore see a considerable level of Community Benefit released into the local community if 1.8GW of generation is routed across the islands with the disruption and disbenefit that this could cause.  This Community Benefit could include donated electrons to combat Fuel Poverty, support with insulating homes, localised production of Green Hydrogen for community return, re-skilling of local Oil & Gas workers for the Energy Transition, STEM Skills development in island schools and so on.  All this is now in doubt with OFGEM’s indication that they will not support accelerated delivery of a 1.8GW link and abandonment of the 600MW link.

An outline of plans for a Hebridean Hydrogen Economy

Comhairle nan Eilean Siar is working with partners to develop a Net Zero Hub at Arnish Point, Stornoway, in three phases: PHASE 1 - from 2024 to 2026, 10MW electrolysis to supply Green Hydrogen to local demand and limited export; PHASE 2 - from 2027 to 2029, an additional 25MW electrolysis to supply Green Hydrogen to SGN’s converted Stornoway Town Centre Propane Gas Network (1,700 consumers); and, PHASE 3 - from 2030 onwards, large volume electrolysis from ScotWind Offshore Wind generation to produce Green Hydrogen for conversion to Ammonia and bulk export to European markets.

Phase 1 will be powered by a small amount of generation from the consented 180MW, 36 turbine Stornoway Wind Farm – effectively, three turbines accelerated within that consent to connect by Private Wire to Net Zero Hub electrolysis.  The intention was then to utilise Shared Ownership in the completed Stornoway Wind Farm to supply an additional 25MW of generation for SGN’s Town Centre Propane Gas Network conversion from 2027.  However, Stornoway Wind Farm generation will not now be available until 2030, if then, when the 1.8GW Transmission Link may be in place.  On the face of it, cable delay to 2030 could have put paid to the Comhairle’s Green Hydrogen ambitions for three years but we are working closely with Stornoway Wind Farm to accelerate additional turbines, connected by Private Wire to the Energy Hub, in order to keep the SGN Town Centre Propane Gas Network conversion project on track for 2027.  We are also in discussion with Technip FMC, one of our ScotWind Offshore Wind partners, to explore back-up generation from a single Floating Offshore Wind turbine off Arnish, deployed under Crown Estate Scotland’s ‘Innovation and Targeted Oil & Gas Decarbonisation’ (INTOG) Leasing Round.

There is no doubt that, over time, the Western Isles will become one of the UK’s main centres for Green Hydrogen production and export of Ammonia or Methanol but key building blocks must be put in place now by both Governments.

August 2022