- Progressive Energy’s homegrown hydrogen technology and project could act as a platform for others across the UK and abroad
- HyNet North West will bring an estimated £17 billion GVA for the North West
- It will create 5000 jobs within the region by 2025
- All new gas boilers in the country could be hydrogen-ready by 2025
- With government support, strategic investors, alongside private sector investors and corporate finance houses to be the biggest players to back the UK’s green hydrogen revolution
- Creation of a new UK infrastructure bank in Leeds will be allotted £12 billion in capital and aims to fund at least £40 billion worth of public and private projects, beginning in the Spring
- £15 billion to be put into green bonds, including for retail investors, to help fund the country’s transition to net-zero by 2050
Q: The UK’s Northwest is the birthplace of the industrial revolution. Following the news of the £750m Essar-Progressive joint investment in the HyNet hydrogen production hub, will the northwest of England be the birthplace of the nation’s Hydrogen Revolution?
The North West has a long and rich history as the home of industry in the UK and has the most manufacturing jobs of any UK region. Leading the way in hydrogen innovation is the next chapter in its story.
HyNet North West will bring an estimated £17 billion GVA for the North West. It will create 5000 jobs within the region by 2025 and many more beyond. Importantly, it will help safeguard existing jobs, retaining the existing technical skill base within the region.
Q: Could we see UK hydrogen technologies, such as those being used for the HyNet hub, be exported to other nations?
The project is a low cost, low carbon hydrogen production facility that uses U- developed technology from blue-chip company Johnson Matthey. This will be a showcase for replication in other clusters across the UK, as well as globally. HyNet North West will position the North West, and the UK, as leaders in hydrogen technologies and skills for export, in addition to attracting new inward investment.
Q: Why hydrogen, why now?
There is already a significant level of appetite to invest in the hydrogen economy. Investment in renewable electricity has been substantial over the last decade, but there is an increasing recognition that electricity represents less than 20% of our energy system, and there is a need to transform the rest.
Hydrogen is exciting as it unlocks low carbon solutions across the whole landscape – addressing industrial heat demand, non-disruptive heat for domestic and commercial customers, dispatchable power for when the wind isn’t blowing as well as low carbon transport.
Investment opportunities are created in hydrogen production, its associated distribution and storage infrastructure as well as in the emerging end-use markets.
Q: Which players will be the first to bankroll future hydrogen projects given the early stage risk profile of hydrogen? And what appetite does Progressive have for green bonds?
Transformation of any sector brings with it significant opportunities, but inevitably a level of risk for early investors. This isn’t primarily technology, but market risks. In that regard, we are seeing strategic investors taking an early leading role. They are best placed from the private sector side to manage these risks. Cornerstone strategic investment in projects unlocks financial investors alongside debt to provide the capacity required for the sector.
Government has a key role. The huge success in offshore wind was enabled by the bankable ‘Contracts for Difference’ (CfD) regime which provided certain and financeable contracts for delivery. The same is urgently required to unlock the hydrogen economy. This is what will underpin the business case for projects to allow investment in hydrogen production.
Appropriate regimes are also required for associated infrastructure, such as distribution and storage, building on custom and practice for today’s gas infrastructure. With these in place, the investment community has the appetite to deliver the investment required.
Green bonds can assist in providing capacity, but the primary and urgent focus for government must be in implementing the underlying business models for delivery.
Q: How does Progressive envisage homes will be supplied and retrofitted for a hybrid natural gas and hydrogen solution (i.e. boiler)? At what cost to the consumer will this be? What tax and funding initiatives will be in place by 2023 to make this attractive?
Hydrogen unlocks low disruption, affordable low carbon heating in the home. By blending hydrogen into the gas network, we can reduce our carbon emissions without the disruption and cost of installing heat pumps retrospectively. It also allows progress to be made ahead of conversion of the network to full hydrogen.
Our HyDeploy project is currently trialling of blending hydrogen. The project has shown that 20% of hydrogen by volume (7% by energy) can be blended into the gas distribution network. If rolled out across the UK gas distribution network, this equates to 29TWh of hydrogen with no changes required by consumers.
The HyNet cluster aims to delivers blends to around 2 million households, as well as commercial and industrial users from the early phases of the project. There is potential for further expansion to other nodes on the gas distribution network.
Blending hydrogen in the gas network not only reduces the carbon intensity of network gas, it assists in establishing early bulk hydrogen production with CCUS, developing hydrogen infrastructure, building associated supply chain, address regulatory hurdles and, importantly, the consumer perceptions of hydrogen. Therefore, it provides a low-regrets means to provide a platform to enable the use of hydrogen in the other sectors identified.
The technical and safety case for delivery is being unlocked through the HyDeploy programme. This will need to be supported by the necessary regulatory and commercial changes on the networks. However most importantly will be the business model to support hydrogen production and the necessary policy drivers to encourage its use on the network as a blend.
In parallel, as part of the transition towards 100% hydrogen, we fully support the proposal to mandate that, by 2025, all new gas boilers must be hydrogen-ready.
Want to learn more about global green investment opportunities?
Check out Corporate Financier’s March 2021 cover story:
Panel Show – how $300bn of global investment in #Renewables has been boosted by #corporatefinance experts as the world targets #ZeroCarbon
BuzzVestor Media’s Katherine Steiner-Dicks asks Luke Clark, Rhian Elstom, David Gudgin, Sam Hollster, Gavin Quantock, Hannah Routh and Carl Swansbury their take on the latest green investment opportunities and pain points.
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