Source · Select Committees · Science, Innovation and Technology Committee
Recommendation 27
27
Acknowledged
As with other low-carbon systems, there are costs associated with the development of infrastructure and...
Conclusion
As with other low-carbon systems, there are costs associated with the development of infrastructure and the uptake of hydrogen use within every use case. The relatively higher prospective cost of low-carbon hydrogen will increase overall costs of, for example, manufacturing, transportation, or heating. There is a risk that because of these costs and impacts on end user prices, the companies and other entities forming these new hydrogen-based, low-carbon, value chains risk failure from non- competitiveness. (Paragraph 197) The role of hydrogen in achieving Net Zero 77
Government Response Summary
The government acknowledged the risk of non-competitiveness due to the higher costs of low-carbon hydrogen and outlined measures such as the Hydrogen Production Business Model (HPBM), transport and storage infrastructure, and exploring the need for market intervention on hydrogen power.
Government Response
Acknowledged
HM Government
Acknowledged
Low carbon hydrogen has an important role to play in decarbonising vital UK industry sectors and provide flexible deployment across power, heat and transport, and potentially heat. The HPBM will provide revenue support to hydrogen producers to overcome the operating cost gap between low carbon hydrogen and high carbon counterfactual fuels, thereby incentivising both production and use of low carbon hydrogen through the provision of ongoing revenue support and making hydrogen an attractive decarbonisation option across sectors. Government is working to consider further appropriate measures to drive investment and deployment across the value chain, including, for example, exploring the need and case for further market intervention on hydrogen power. Hydrogen transport and storage infrastructure will also be critical to enabling government’s hydrogen ambitions as it will connect producers with consumers, and balance misalignment in supply and demand. However, lengthy development lead times, high capital costs and uncertain financial investment returns in a nascent market mean this infrastructure is unlikely to materialise without a supportive policy framework. For this reason, government committed in the BESS to designing new business models for hydrogen transport and storage infrastructure by 2025. Last year, government published a consultation on design options for these business models, and will publish its response in due course. The UK is committed to protecting our industry from carbon leakage as our economy decarbonises, and currently does so through free allocation under the UK Emission Trading Scheme (ETS). We are currently reviewing our approach to free allocations, looking at ways to better target support for those most at risk of carbon leakage to ensure they are fairly distributed. In addition to this, government is exploring a range of approaches including carbon border adjustment mechanisms (CBAM), mandatory product standards (MPS) as well as measures to grow the low carbon economy (voluntary standards, product labelling and green procurement). Government has committed to develop a Low Carbon Hydrogen Certification Scheme by 2025 to underpin deployment of low carbon hydrogen and support future international trade.