HYD0024

Written submission by INOVYN

About us

INOVYN is part of the INEOS Group. We are at the heart of Europe’s chemical industry. Our products find use in almost every aspect of modern society, keeping people housed, healthy and connected. Our products are used in some of the most demanding applications and are fundamental raw materials for industry sectors as diverse as automotive; building and construction; paints and adhesives; food; healthcare; and medical.

With more than 4,300 employees, INOVYN has manufacturing operations in eight countries across Europe. In the UK, INOVYN produces chlorine for purification of most of the domestic water supply as well as other essential uses.

We have been producing hydrogen at our North West manufacturing site for more than 100 years. The hydrogen is used as industrial gas, supplied to customers, used to make other chemicals and burnt as a zero-carbon fuel for heat.

Parent company, INEOS is one of the world’s leading chemical companies with 22,000 employees at 183 sites, across 26 countries.

 

Executive Summary

  1. INOVYN and other businesses within INEOS, have been generating, using, storing and supplying hydrogen for many decades, both as a fuel and chemical feedstock. Hydrogen is already being used for transport in buses, trains and cars across Europe. There are several projects to demonstrate its use as a replacement for home heating. Clearly hydrogen is feasible and capable of replacing natural gas and petrol/diesel in most applications. However, it is not fully cost effective in current market conditions.
  2. Effectively hydrogen is an energy carrier not a primary fuel. Production of hydrogen (whether from methane or electrolysis) requires a number of energy transitions with efficiency losses at each stage. Therefore, even before taking account of the significant high capital equipment required for production, we must recognise that hydrogen will be more expensive than the primary fuel used to produce it for the useful energy delivered. To make the cost of hydrogen as competitive as possible, economies of scale must be established requiring very significant investment and ongoing support to incentivise consumption rather than use of the primary energy source. The UK should move beyond the current ad hoc, competitive approach to carry out further feasibility studies and move to invest significant money (£100’sM) in infrastructure to start the transition to delivery at national scale.
  3. UK energy and carbon costs are already higher than many other manufacturing regions. Additional government support and a clear long-term policy framework are essential to encourage investment in fuel switching and manufacturing. Incentives which promote hydrogen production are required.
  4. Hydrogen can play a crucial role in the direct replacement of natural gas in virtually all current applications and provide additional benefits in the transport sector such as heavy goods, trains and shipping, where fuel oils dominate today. Hydrogen may be the only solution to industries where direct fire high temperature “flame” is required (such as glass/ceramics). Hydrogen is the only credible means for domestic heating at national scale, within the timescales required, at a reasonable cost.

 

 


How effective has the Government’s investment in hydrogen projects such as the Low Carbon Hydrogen Supply competition, the UK Hydrogen Mobility Programme and Hy4Heat been in moving the sector towards becoming an integral part of a low-cost, low-carbon economy and boosting the productivity and competitiveness of the UK energy sector?

 

  1. The Government’s investment to date in hydrogen projects has not been at all effective in making progress to deliver significant scale hydrogen infrastructure for low carbon (gas) heating or meaningful transport options. Whilst INOVYN welcomes the initial government support, what is lacking is an overarching strategy and policy framework to move the sector forward effectively which encourages, through a coherent incentivised and legislative programme of measures, a transition to a widespread hydrogen economy.
  2. The European Commission has identified hydrogen as one of the key future technologies for Europe. The UK government has placed the adoption of hydrogen firmly at the centre of both industrial (‘Building a Britain Fit for the Future’) and environmental (‘Leading the Way to a Low Carbon Future’) policy. In fact, the inclusion of significant levels of hydrogen in our energy mix is the only credible means to achieve net zero, as complete electrification with renewables could not be achieved in a reasonable timescale and cost.
  3. Yet the amounts of government funding made available (£10’sM) and required short timescales (typically 18mths) for expenditure, only support preliminary feasibility studies; Front End Engineering Studies; and small-scale trials.
  4. Hydrogen has been used by industry, including INOVYN and other parts of INEOS, as a fuel and a chemical feedstock for many decades. Hydrogen is already used as a transport fuel for buses and cars in the UK and across Europe.
  5. Large scale roll-out of UK wide infrastructure is needed to further develop the technology, improve the cost efficiency ‘while doing’ and starting on the journey to net zero. Greater support and assurance from Government for both Capex and Opex would lead to an acceleration of projects. New generation, distribution and storage infrastructure will be required, costing £100sM per project/area. Development of hydrogen schemes will require establishing consortia with a range of skills and interests (production/distribution/storage/technology providers/consumers). Each member will need to see the ability to earn returns on investments likely requiring the co-ordinated and controlled approach to bring schemes to fruition.
  6. In summary, the amount of funding announced to date is not nearly sufficient to deliver the scale of infrastructure required to start down the decarbonisation journey to net zero. To ensure cost effective delivery, long term support at a significant funding level is required, to move beyond the feasibility stage to the demonstration phase.

 

What level of output can the sector deliver in the UK, and what Government support would be needed to achieve this? How does the potential for hydrogen differ by end-use?

  1. Hydrogen is capable of being a direct replacement of natural gas in virtually all current domestic, commercial and industrial heating applications. In addition, hydrogen can replace diesel in a number of transport sectors, particularly at the heavier end. Hydrogen is a better choice of fuel than battery electric for HGV’s, due to much reduced refuelling times and much greater range. Thus, hydrogen could deliver very significant reduction in emissions if given enough support.
  2. The gas network is already setup to deliver the large swings in energy demand from summer to winter and substitution with hydrogen is the only credible means to replace this. Whereas the electricity network is not currently capable of delivering this much energy and the summer / winter spread with the high peaks of energy demand and the complete electrification could not be achieved in the required timescale. This variation in demand is supported by gas storage in salt caverns, capable of storing TWhs of energy. In contrast there are very few options for the storage of sustainable volumes of electricity. Hydrogen used as a replacement for natural gas would be equally capable in delivering this energy swing and can be readily and safely stored in salt caverns to manage both daily, weekly and seasonal fluctuations. A typical single salt cavern can store 400 times more energy than the largest grid-scale lithium ion battery store in the world today.
  3. Different production technologies will be required to meet the required output depending on end-use. Reforming natural gas with CCS has the potential to deliver the TWh range required for domestic heat/industrial applications, whereas electrolysis from renewables is more suited to local production and delivery in the transport sector.

 

How realistic is industry’s claim of widespread applicability of hydrogen technology in transport, heating and other sectors? Is hydrogen a cost-effective, feasible solution towards a low-carbon economy?

  1. Hydrogen is already used by INOVYN for industrial heating and as a reagent in chemical manufacture. Hydrogen is already in use as a fuel for vehicles. Hydrogen is already being trialled (HyDeploy) as a fuel in domestic heating applications. Clearly hydrogen can be used in both the transport and heating sectors. Thus, the use of hydrogen is not new, the technology is safe and proven. However, it is a matter of scale, cost and the level of infrastructure that is required to enable large scale uptake.
  2. The capital cost of the required infrastructure over the coming two decades is significant and cannot all be borne by the supply industry and industrial consumer, if a competitive energy base is to be maintained for UK industry competing in a global market. Decarbonisation projects rarely provide the required payback / return on investment that industry needs when bringing forward projects in the UK.
  3. Production of hydrogen (whether from methane or electrolysis) requires a number of energy transitions with efficiency losses at each stage. Therefore, we must recognise that hydrogen will be more expensive than the primary fuel used to produce it for the useful energy delivered. Measures will be needed to avoid industry relocating to locations that don’t face these additional costs.
  4. UK energy and carbon costs are already higher than many other manufacturing regions. Additional government support and a clear long-term policy framework are essential to encourage investment in fuel switching and manufacturing.

What are the different implications of hydrogen produced from fossil fuels versus from renewables in terms of cost, scale, and emissions, and in terms of meeting the UK’s net zero targets?

  1. Hydrogen generated by methane reforming (‘Blue’ H2) and electrolysis of water (‘Green’ H2) are both proven technologies in operation today. ‘Blue’ Hydrogen from methane with CCS is considered ‘carbon-neutral’, likely to be cheaper than from electrolysis and will be the dominant supply in the medium term. Hydrogen from electrolysis using green electricity will have an increasing penetration in the longer term but the scale of investment required to meet the total UK energy demand by this route by 2050 would be prohibitively expensive and likely practically impossible.
  2. Other forms of hydrogen generation will have their place and can feed into a newly established network but are not likely to provide the large scale that will be required.
  3. Projects such as HyNet NW, which includes hydrogen from methane, carbon capture and storage, hydrogen storage in salt caverns and hydrogen distribution to industry and consumers, will be essential to kick start this low carbon economy and facilitate future expansion and investment.
  4. Additional hydrogen generated from electrolysis or from other sources can then be added to the network, as can new consumers, such as transport customers.

How feasibly can hydrogen technology be applied in various sectors, from transportation, to energy generation and industrial processes, whilst maintaining the highest safety standards?

  1. Hydrogen is already used today for transport and industrial heating in the UK, including by INOVYN. Trials are underway to prove its use for domestic heating (HyDeploy). The gas industry and the chemical industry have a long history of the safe handling of hydrogen, gas and chemicals, working under rigorous safety conditions. Many of the required standards already exist, so hydrogen safety is unlikely to be a significant issue.
  2. A wider uptake of hydrogen in the transport, heating and industrial sectors can only happen though, with a roll-out of a reliable and competitively priced hydrogen network and infrastructure across the UK. Maintaining a competitive price for hydrogen must be balanced with retaining the high safety standards already operated.

 

How might the UK take advantage of further advances in hydrogen technology, such as hydrogen boilers and innovative storage and distribution solutions?

  1. Hydrogen ‘generation, storage, supply and use’ technology exist today and are already in operation. The UK needs to further develop these technologies by deploying at significant scale.
  2. The industry needs to ‘learn by doing’. Each new project will be better than the last. Efficiencies, costs and technologies will improve with time. It is now time to deploy large scale infrastructure, build the customer base and create a demand for hydrogen. New technologies will then flow from this critical mass.
  3. The UK already safely stores significant quantities of energy as natural gas in salt. Large scale hydrogen storage in salt caverns exists today. The UK geology offers the opportunity to store hydrogen in very large volumes, securely and at low cost. The scale up and provision of salt cavern storage is only waiting for a demand and the necessary capital investment and government support.

 


What support does the sector require to keep pace with the most cutting-edge innovations, such as in hydrogen fuel cells, using Small Modular Reactors for hydrogen production and in end use applications?

  1. Long term policy framework for cost competitive energy supply industry.
  2. Level playing field or policies to support low carbon fuels.
  3. Creating a demand for hydrogen will bring innovation and development of new technologies, such as improved fuel cells to a real-world market.

 

What is the UK industry doing to scale up green and blue hydrogen production by using its offshore wind capability and developing feasible, cost-effective Carbon Capture, Utilisation and Storage technologies?

  1. The North West has a long history of the electrolysis of brine to produce chlorine for water treatment, sodium hydroxide and hydrogen for industrial use. This extensive experience in the safe manufacture and handling of gases and chemicals makes INOVYN’s Runcorn Site and the North West an ideal location for the scale up of hydrogen generation from electrolysis. This is further supported by the potential for hydrogen storage in the regions’ salt caverns.
  2. The HyNet NW project, proposes to build a large-scale hydrogen generation plant from reformation of natural gas. Captured CO2 from this and an existing ammonia plant would be safely sequestered in the east Irish Sea. Hydrogen would be transported via new dedicated pipelines to industry and the supply balanced in newly created salt cavern storage. The project just needs the right funding support.
  3. The North West region already has significant offshore wind generation in Liverpool Bay. In addition, the Liverpool City Region Combined Authority is investigating the feasibility and economics of a tidal lagoon power generation plant at the GW scale. However, without a hydrogen demand further development cannot occur.

Given hydrogen’s potential cross-sector application, how co-ordinated is the Government’s approach to policy and regulatory development of hydrogen?

  1. The hydrogen economy would greatly benefit from increased coordination between the various government departments to give long-term policy certainty to support hydrogen for industry, heat and transport.
  2. The level and percentage of funding is insufficient to drive large-scale projects forward. Match funding by industry in the current economic position, competing with global manufacturers, makes investment decisions unlikely. All investors in the hydrogen economy must see the economic benefit in making their investments.
  3. Recent changes in charging policy for natural gas storage and increased business rates for storage operators are likely to significantly impair existing operations, limiting further investment and may well lead to some closures. The result of which will be a negative impact on the UK’s future infrastructure for energy storage and ability to deploy hydrogen at scale. 

The multiple small-scale funding programmes, competitions and schemes, each with different rules and eligibility criteria, are more suited to consultant engineering companies looking at feasibility studies. The processes are not suited to large-scale industry looking to make a significant roll-out of the technology.

How well has the Government raised awareness amongst industry, public officials and the general public of the potential for hydrogen to support a low-carbon economy?

  1. Industry is aware of the low carbon challenges and the potential for hydrogen to provide a solution. It has long been recognised as a definite route to decarbonisation.
  2. To a lesser but increasing extent, public officials and local /national government are also increasing their understanding of the potential for hydrogen in the industrial, heat and transport sectors. Although there remains a lack of understanding of the challenge in the scale of change required.
  3. However, there remains a significant gap in the public’s understanding of the need to address all areas of decarbonisation, such as all modes of transport and domestic heating. At present it is largely seen as being just “industry’s” problem.
  4. Offshoring manufacturing industry by closure in the UK and manufacturing in the US or China will only increase total carbon emissions for a given product, due to both lower efficiency of manufacturer and additional transport.
  5. Domestic heating is a significant contributor to greenhouse gas emission. Hydrogen has the potential to provide a solution to this, but the cost of infrastructure and energy supply will have to be borne by the consumer, with the same for transport. Greater education on these matters needs to be driven by government.

To what extent has the UK established, or can establish, any early adopter advantage in the use of hydrogen in research, applied science or industrial processes? Which countries are at a similar or more advanced stage than the UK in exploring applications for hydrogen in helping deliver net-zero targets?

  1. The UK is already lagging our competitors e.g. China, South Korea and Europe in the production of fuel cell technology and hydrogen vehicles; Europe in the investment in hydrogen infrastructure; Europe and Japan in the production of hydrogen electrolysis technology.
  2. However, the UK, with its very established energy distribution network of natural gas, that is mostly isolated from the rest of Europe, is already in a good position to switch to hydrogen.
  3. The UK also has significant CO2 storage potential in offshore gas reservoirs.
  4. The UK has significant hydrogen storage capability in salt caverns such as those created by INOVYN in Cheshire.
  5. Thus, the UK is very well placed in Europe for Hydrogen generation from electrolysis/methane reformation and subsequent storage in salt caverns.
  6. The use of hydrogen is almost certainly going to be more expensive than incumbent fuels, thus early adopter advantage for industry and consumers will bring green benefits but not financial benefits.

What can the UK hydrogen sector learn from other countries’ hydrogen strategies?

  1. The UK needs a coherent strategy, roadmap and policy framework based on regulation and incentivisation with readily accessible finding to move the UK forward at a pace to compete with other nations and achieve the legislated climate targets.
  2. Many other countries now have a hydrogen strategy and package of measures to enable net zero by 2050.
  3. The German government has recently included a package of 9 billion euros to support hydrogen technologies within their overall economic stimulus package.