Hydrogen and carbon capture in Scotland

The UK and Scottish Governments have clear strategies and appropriate aspirations for hydrogen, with significant commonality in their ambitions. Overall relations between the UK and Scottish Governments in this area appear to be good with effective official-level and ministerial cooperation.

The UK and Scottish Governments have different net zero target dates of 2050 and 2045 respectively. We recommend the UK and Scottish Governments respond to this report explaining how they will work together to ensure respective targets will be met. The Scottish Government should demonstrate how it is engaging with UK Government in reserved areas to ensure net zero is reached in Scotland five years earlier than the rest of the UK.

The UK and Scottish Governments arrived at their respective 10GW and 5GW by 2030 low carbon hydrogen production targets independently of each other, and we are unclear how the two targets align and whether either is achievable. Clarity on this is vitally important given the targets must be reached in just seven years’ time. We recommend that the UK and Scottish Governments, in response to this report, explain how they arrived at their respective 10GW and 5GW by 2030 low carbon hydrogen production targets and how the two targets align. Furthermore, the two Governments should provide us with a proposed timeline setting out key milestones on the road towards the respective targets to assist us and our successor committees in judging progress and evaluating the achievability of Scotland’s hydrogen production targets.

We conclude that both the UK and Scottish Governments’ hydrogen strategies require interim targets to ensure that hydrogen production and net zero commitments are met. We recommend that both UK and Scottish Governments set such interim targets for hydrogen production, beyond 2030, to reach its net zero targets planned for 2050. In particular, we recommend the Scottish Government expedite their interim target setting due to the more pressing deadline they set of 2045. By the beginning of the next Parliamentary session, the UK and Scottish Governments should set deadlines for approving a series of steps around hydrogen production and actions to stimulate demand of low carbon hydrogen, as the decisions need to be made without delay to ensure that net zero targets are met, energy security is obtained, job security is provided for workers in Scotland, and cleaner energy production and international competitiveness are realised. By the beginning of the next Parliamentary session, the UK and Scottish Governments must publish a timeline of key decisions for projects, with justification of the dates set out in the timeline, as well as interim targets for production and demand of both blue and green hydrogen, and the phasing out of grey hydrogen.

We are concerned that the Scottish Government does not see more potential in Green Freeports to complement Scottish and UK hydrogen policies, despite them being a joint UK and Scottish Government initiative and the Inverness and Cromarty Firth Green Freeport having a hydrogen focus. We recommend that the Scottish 46 Hydrogen and carbon capture in Scotland Government explores how to maximise the benefits of Green Freeports for Scottish and UK hydrogen ambitions. Both the UK and Scottish Governments should work together to realise this potential and the opportunities for Scotland.

We acknowledge the concerns raised by our witnesses around slippage in timings for hydrogen projects. This could delay the delivery of low carbon hydrogen projects and result in a failure to meet net zero targets. Urgency is required now; timely decision making will also mean Scotland and the rest of the UK do not get left behind with technology development and hydrogen production when compared to other countries’ hydrogen sectors. We recommend that the UK Government sets out how it will address concerns we have heard around timings of decisions for hydrogen projects, including justification for the timing of decisions and an assessment of the impact the timing of decisions will have for the delivery of low carbon hydrogen projects, net zero targets and Scotland—and the rest of the UK’s— international competitiveness in the sector.

Better training in the hydrogen project consenting process for both local authorities and private organisations is required to speed up planning decisions for hydrogen projects. We note the actions the Scottish Government has taken in recent months to streamline these planning issues, including its engagement with local authorities on hydrogen planning applications. However, the Scottish Government has an important role to play and this work should be a continuing process. As planning is a devolved matter, we would ask for an update from the Scottish Government as to how this work is progressing.

We recommend that, in order to speed up the planning process and make it more efficient, the Scottish Government should facilitate the necessary knowledge sharing for planning teams in local authorities and private sector organisations. This should focus on the process of obtaining planning consent for hydrogen projects, covering production sites, storage sites and pipelines and the roles different individuals play in determining process and planning outcomes. The Scottish Government should consider the establishment of a dedicated body to deliver this work and implement it as soon as possible in light of the impending 2045 targets.

Scotland and the rest of the UK will not be able to deliver on their net zero commitments without carbon capture and storage (CCUS): a factor that is critical to the success of the hydrogen industry in Scotland. Carbon capture and storage and hydrogen production will both be required, in conjunction with other renewables, to achieve a just transition from oil and gas.

Delays to decision making around cluster sequencing and the Acorn Project are disappointing. But we noted the positive comments on CCUS from the UK Minister. Furthermore, such delays lead to an even further deficit in carbon capture facilities in Scotland and the ultimate result is a prolonged period when carbon continues to be released at avoidable levels.

We recommend that the UK Government accelerates the deployment of carbon capture and storage in Scotland and sets out, in its response to this report, how it intends to do so. Furthermore, in Minister Stuart’s response, he stated that the Scottish Cluster project had already received “£40 million plus”. The UK Government should provide details of how precisely they have funded the Scottish Cluster so far. We hope that the UK Government provides details for funding for the Acorn Project in the upcoming Budget.

The evidence we have received demonstrates that there is vast potential for the export of low carbon hydrogen and expertise from Scotland, which could generate significant economic benefits to the economy. We welcome some recent policy updates and note the UK Government’s focus on domestic decarbonisation as it strives towards net zero. However, if Scotland—and the UK as a whole—is to become a significant exporter of hydrogen, both governments need to work together.

We recommend that the UK and Scottish Governments work more closely to ensure the achievability of their respective ambitions for hydrogen exports, and that the economic benefits are realised. In its response to this report, the UK Government should continue to update this committee on progress over its timeframe for securing an export market and current progress in assessing the opportunities and risks, as well as addressing the challenges we have described, including around infrastructure and balance between export and domestic consumption. As international trade is reserved, we recommend that the UK Government outlines what it is doing to make hydrogen export more commercially attractive and how the UK Government plans to bring in investors while engaging with the Scottish Government and hydrogen industry.

Furthermore, we recommend that the UK Government publish modelling to quantify in more detail the long-term investment required to secure an export market and the potential economic benefits that could accrue to the UK, from such a market. The Government must identify markets and establish a presence within them before other countries do.

We recommend that the UK Government highlight its potential for export to overseas markets immediately. This is to ensure that companies in Scotland can benefit from global hydrogen export markets and opportunities and not be left behind.

With the vast renewable energy resources it has available, Scotland can play a vital role in green hydrogen production for the UK and for export to Europe. However, secure hydrogen storage is essential to ensure hydrogen can become central to the energy mix of the UK. Without robust hydrogen storage infrastructure, Scotland will not be able to meet its hydrogen production potential.

We recommend that the UK Government alongside the Scottish Government moves quickly to develop hydrogen storage, to meet increasing demand, help Scotland and the rest of the UK enhance energy security and meet net zero targets.

The UK Minister told us that the UK Government’s preference is for the private sector to lead the development of storage infrastructure. For businesses to lead the way in such a crucial aspect of Scotland and the UK’s net zero and energy security ambitions, a clear set of regulatory conditions and economic incentives will be required to encourage development at the pace needed. Therefore, we recommend that in response to this report the UK Government establish an action plan to identify and address economic and regulatory barriers for hydrogen storage to ensure that, once large-scale hydrogen production becomes possible, appropriate storage is in place.

We recommend that the UK Government should examine how storage of low carbon hydrogen could be made a national infrastructure asset as this could help guarantee energy security for the UK.

Scotland is in a very strong position compared to many other countries wanting to develop their hydrogen industry, in part because it already has a large relevant skills base in the oil and gas sector that has the potential to be redeployed. The work the UK and Scottish Governments have been doing on skills and jobs for people to work in the hydrogen sector should be applauded, but further progress needs to be made urgently to ensure that Scotland continues to provide vital workers for the low carbon energy industry. The industry needs to take a leading role in working with both governments to identify gaps in the workforce and the skills that are needed as well as deciding how to transition and re-train people.

We recommend that the cooperative approach between the UK and Scottish Governments on skills training and jobs continues, not least because of the mixture of reserved and devolved competencies when it comes to energy, education and skills. On at least a biannual basis, the UK and Scottish Governments should jointly set out work they are undertaking to ensure that colleges, training providers and businesses within the hydrogen and CCUS sectors are able to offer appropriate routes into employment and training, and providing this information should be viewed as a priority. Incorporated into this analysis, both the UK and Scottish Governments should also provide regular updates on progress against their estimated jobs forecasts in the medium term.

We recommend that the UK and Scottish Governments work in tandem with industry in identifying the jobs and skills gaps in the existing workforce. Industry should work in cooperation with the UK Government to ensure their policies and initiatives are complementary. Industry alongside the Scottish Government should develop and implement a clear plan for transition and re-training its workforce– in light of the Scottish Government’s presumption against further oil and gas exploration and no nuclear in Scotland–and this could be supported by organisations such as Hydrogen UK.

We recognise there is a mix of evidence on the role hydrogen can play in the decarbonisation of domestic heating and there is still a substantial amount of work being done that will determine its eventual use. However, in the meantime, the evidence in favour of mandating hydrogen-ready boilers in all suitable properties at the earliest opportunity is convincing, no matter what decision is eventually made on the blend of hydrogen in the system, or whether the system becomes a 100% hydrogen gas network. Assurances from the largest four boiler manufacturers indicate that hydrogen-ready boilers will be the same price as standard boilers, removing a key obstacle in rolling them out across UK households. It means millions more properties would be ready and able to switch to hydrogen sooner rather than later and with lower conversion costs, if required, should the UK Government opt for a low carbon hydrogen-based gas network.

We recommend that, in anticipation of a decision around the use of hydrogen in heating by 2026, the UK Government should mandate hydrogen-ready boilers for all suitable new or replacement installations as soon as practicable and at least introduce that decision, with clear timescales, into the statute book by the end of the next parliamentary session.