GUEST BLOG: Stuart Broadley, Energy Industries Council
Stuart Broadley, CEO at the Energy Industries Council gives his thoughts on the recent industrial decarbonisation event held at Thornton Science Park.
I was fortunate to work with Peel Environmental and the North West Hydrogen Alliance recently presenting to 100 businesses, and the discussions were starkly exciting, compelling and challenging, all at the same time!
- Outgoing UK Prime Minister Theresa May’s final act was to write net zero carbon 2050 targets into law
- To progress with bringing net zero carbon to the fore, Government’s strategy was then to encourage companies, academia and public bodies to collaborate within “clusters”, as the most viable UK regions to decarbonise and innovate
- North West (NW) is one of 5 UK “clusters” for clean technology development and energy transition, the others being Teesside, South Wales, Humberside and Grangemouth, centred around the UK’s largest CO2 emitters
- Government encourages competition for funds between clusters initially, eventually though expecting national coordination to create one UK strategic low carbon capability
- Lots of excitement in the clusters – such as NW, with £4bn investment planned, 33000 new jobs by 2030, 10m tonnes of CO2 to be stored/reduced and exciting facilities/projects under development like Protos, HyNet, HyDeploy hydrogen/gas blending
- Industry is not scared by the technology required to deliver energy transition, but its main challenge will be switching from cost efficiency mindset to carbon efficiency mindset, and then ensuring fast enough scale up
- Expectation in short and long term is that more hydrogen will be processed from methane (blue) than water (green), implying a major role for O&G operators, although only green hydrogen is zero carbon
- As CO2 is a direct by-product of blue hydrogen production, then Carbon Capture Utilisation and Storage (CCUS) will have to be a mandatory element of low carbon
- To make matters more complicated, with UK being a net importer of products and commodities, the UK carbon footprint from imports is twice that generated from inside UK. Government will therefore have to mandate zero carbon guarantees for imported goods.
- It is estimated that it will cost an additional £1trillion to get the UK to net zero carbon by 2050
- It’s also estimated that consumers will have to pay double for hydrogen versus gas in their homes and businesses in the low carbon future, but consumer feedback reveals an unwillingness to pay this premium
- There is certainly a new and powerful sense of urgency to accelerate energy transition to low/net zero carbon, driven by successful activism in NW Europe, Canada and Australia, measured by ~20% share price dilution in oil and gas players in those regions
- Although businesses may feel aggrieved that their share prices are down in these regions, it also provides a business opportunity. With the right investment, and by rooting technology, supply chain, research and skills in the five clusters, the UK could be a “first mover” and dominate the global hydrogen and CCUS boom that is sure to come in the future.
- With all this excitement, potential and a real sense of urgency, what is needed to bring it all to life? That would be three things – policy, legislation and funding – which are all of course controlled by government.
- The good news we can learn from the last energy revolution that occurred in the UK – offshore wind. Famously, the UK has the world’s largest offshore wind production, but what is less well known is that we import the vast majority of this capability. Government policy 10-15 years ago failed to ensure that offshore wind technology was developed and rooted in the UK, and so today we buy most offshore wind technology from Denmark, the country that had the right policy, at the right time. Players like Orsted, Siemens Gamesa and MHI Vestas are world leaders in offshore wind and are still Denmark-based, making Denmark a major exporter for wind technology. We need to learn from this and make sure upcoming hydrogen and CCUS investment decisions in the UK are centred on rooting that technology in the UK, not once again simply buying it from abroad from the lowest bidder.
- Although we missed out on the export opportunity with offshore wind, Government successfully used the subsidised CfD model to make sure we decarbonised our electricity production at a rapid rate via wind, now achieving close to 30% of our national generation capacity. This funding model can be applied again for hydrogen and CCUS.
- Offshore wind has now achieved competitive pricing, but this has taken ten years of government subsidies, which have cascaded down to UK tax payers via higher utility bills. Consumers are now aware of this link, so will be vociferous when utility bill costs rise due to hydrogen and CCUS CfD subsidies. But is there another way? Perhaps it could be partially funded by a one-off tax on oil companies? This will satisfy activists, but will be resisted by others who fear their exodus to lower tax countries.
- All of this talk of new technology and investment may seem unlikely to change anything, but for the coincidence of good timing….
- COP26, under the presidency of ex-UK Energy Minister Clare Perry, is scheduled to happen in Glasgow in November 2020. What an amazing opportunity this is for a new UK government with a large majority to push through major policies and funding commitments to shout to the world on the COP stage, next to 100 other world leaders, that UK commits to becoming global technology leader in hydrogen and CCUS.
- Stranger things have happened.