Barclays – How to turn the UK’s hydrogen ambitions into a reality
Barclays details four key policy recommendations for the UK government to support the scaling of private finance to deliver a pragmatic approach to clean hydrogen
- Communicate a pragmatic, actionable view on the role it wants to play in the international hydrogen economy
- Deliver a detailed hydrogen roadmap underpinned by enabling policy actions and clear timeframes
- Work with industry to develop demand-side policy interventions for key sectors, including tools such as hydrogen quotas or mandates
- Retain a credible and bankable revenue support mechanism for clean hydrogen
The UK has an opportunity to harness hydrogen’s potential in driving the transition to net zero if it can create the right enabling environment, taking a clear and pragmatic look at where and how hydrogen can play the most impactful role in the transition to net zero.
The government has set an ambitious green hydrogen production target of 10GW by 2030, alongside new financing for low-carbon hydrogen through the National Wealth Fund, and the recent announcements in last week’s Budget that they will move forward with their support for 11 green hydrogen producers.
For the government’s hydrogen ambition to be credible, it will need to carefully balance the ambition and enthusiasm expressed for clean hydrogen, with a consideration of where clean hydrogen can play the most cost- and climate-effective role. This balance should be reflected in clear policy and strategy sitting underneath its headline targets and financial commitments, including a strategy for delivering a large step-up in production, the associated demand to support offtake, and infrastructure to support distribution.
A new paper from Barclays, ‘A pragmatic approach to clean hydrogen’, details four key recommendations for the UK government. These recommendations consider the public policy changes needed to drive the scale up of private finance to meet the UK’s hydrogen ambitions, supporting the delivery of a pragmatic approach to clean hydrogen as part of the decarbonisation of the UK economy:
1) Setting out a credible vision for the UK’s role in a global hydrogen economy.
The UK government, in consultation with industry, should put forward a pragmatic, actionable view on the role it wants to play in the international hydrogen economy, leaning into areas where it has a unique global competitive advantage.
2) Developing a detailed hydrogen roadmap.
Government should deliver a detailed hydrogen roadmap that sets out specific enabling policy actions and investment pathways to deliver headline production targets, against clear timelines. This should cover the full hydrogen value chain and be set within a broad National Transition Plan for the UK so that market participants can understand the role the government envisions hydrogen playing in the wider net zero transition.
3) Delivering demand-side policy interventions to secure a robust hydrogen ecosystem across the value chain.
Government should work with industry to develop and implement clear demand-side interventions for key sectors where it wants to prioritise hydrogen use as part of decarbonisation goals. This could include the use of tools such as quotas or mandates, mandatory use directives, or bans on fossil fuel use by certain dates.
4) Retaining a credible and bankable revenue support mechanism, designing effective structures to support a mature steady-state and price-based competitive allocation process.
Government should ensure its clean hydrogen revenue certainty mechanism remains credible as it matures to a steady-state, price-based competitive allocation process using the tool to incentivise and support the development of a robust green hydrogen market.
Marie Freier, EMEA Co-Head of Energy Transition Group, Barclays said:
Hydrogen has a major role to play in decarbonising the UK, but government must learn from setbacks faced by the US and European hydrogen markets, where projects are facing delays due to regulatory uncertainties and investor doubt.
“To instil confidence and growth across the value chain, the UK government must consider where clean hydrogen can play the most cost- and climate-effective role and deliver this against clear policy supported by a detailed strategic roadmap.’’
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