UK Government Must Do More To Boost Hydrogen Investment

The government must send "clear signals" to clean energy investors that the UK is ready for business, or risk failing to meet its hydrogen ambitions.

Sarah Williams, director of regulation at Wales and West Utilities, told City A.M. that domestic renewables producers would be tempted by rival markets such as the US and EU - which are offering more tempting subsidy packages than the UK.

She argued the government needed to provide a pathway for "investment in hydrogen" to encourage "those investors to invest in the UK now before it's too late".

"I think those signals are clearer elsewhere, particularly in the States and to some degree in Europe. So we need to make sure that we don't fall behind and that we really power through to be a leader in the world." she said.

This comes with National Grid targeting a five-fold hike in transmission lines installations by the end of the decade compared to its last 33 years of operation as a privatised company.

The government is targeting the decarbonisation of the electricity grid by 2035, while Labour has a more ambitious 2030 goal - with the shift considered a vital milestone for net zero.

Green hydrogen - which is produced through electrolysis in water - remains more expensive to generate than renewable alternatives such as wind and solar.

To ease the pressure on electrification and make hydrogen more competitive, she supported a contracts-for-difference style approach to the sector in line with the auction process for securing offshore wind projects.

This is where companies accept capped returns in exchange for a guaranteed income, to counterbalance intermittency in generation, so that they have confidence in committing to new projects.

"Active policy and very well targeted spending - similar to what's happened in wind - that type of messaging is really important to give the right direction," she said.

Williams welcomed Labour's recent pledge to effectively double the government's green hydrogen target - scrapping Downing Street's 'twin track' approach with blue and green options - and instead focusing on 10GW of renewable generation.

However, she believed the country could go "further and faster to set our stall out there on the international stage".

Wales and West Utilities provides gas services for 2.2m customers, as part of the UK's wider network of 22m homes.

Roughly 85 per cent of the country's housing stock is dependent on the energy source to meet its heating needs.

The company is committed to net zero and welcomed the raised £7,500 allowance for heat pumps, but argued the government should also mandate boilers to be hydrogen ready by 2026, as an alternative option.

She said: "For consumers and households, there are challenges around the costs of reaching net zero. So whilst obviously it's important that we do need to move at pace, we also need to make sure that we don't end up leaving people behind who can not afford to change, particularly heating systems."

It would also enable the company to present a plan for repurposing hundreds of miles of gas pipeline infrastructure.

Polling from the Energy Climate and Intelligence Unit earlier this year suggests that while 74 per cent of Brits support hydrogen investments, only a fifth would be in favour of subsidies to make boilers hydrogen ready.

The government recently shelved a proposal to bring in a so-called hydrogen levy, where consumers would fund hydrogen generation at the cost of £120 per year.

City A.M. has approached the government for comment.

By Nicholas Earl via City AM

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