Hydrogen Energy Support in the UK

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Hydrogen Energy Support in the UK

• Final Report
• January 2004

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• This project was conducted as a result of
  discussions of an ad hoc group of parties
  interested in hydrogen energy during Autumn 2003.
  The project team was comprised of E4tech and
  Eoin Lees Energy and the work took place during
  December 2003 and January 2004. The project was
  funded by DTI and guided by the ad hoc group.
• The team would like to thank all those who
  provided inputs to this project. Note that these
  views were provided in confidence to the project
  team.

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Contents

• The challenge
• Hydrogen energy
• Government goals
• Stakeholder needs
• Options and recommendations

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The main challenge is to determine how Government
should support hydrogen energy activities
The current situation

• The UK has a small number of companies and
  research institutions which are already active in
  the hydrogen energy sector
• Hydrogen energy has been identified as an
  opportunity for UK innovation and growth, as well
  as a key option for long term emissions reduction
• There is significant international activity in
  hydrogen energy

• H2 energy support is currently provided by
  several initiatives in the UK, but a dedicated
  programme is lacking
• Fuel cells are supported by a more focused
  programme, including an industry association with
  initial DTI funding. There is disagreement as to
  whether hydrogen and fuel cells should be
  supported together or by separate programmes
• The UK has no clear means to engage in
  international initiatives

Problems with the current situation
Over-riding question

• How should the UK Government provide support to
  hydrogen energy activities?

NB This assessment is not intended to define the
UK programme or strategy per se
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Breaking down the over-riding question
What is hydrogen energy?
What is the scope of hydrogen energy and its
support
Who are the current actors in the UK?
What approaches are used in other countries?
What are the goals of UK Government with respect
to H2 energy?
Explicit goals
Implicit goals
H2 energy industry
How should the UK govt support H2 energy?
What are the needs of stakeholders with respect
to H2 energy?
H2 energy RD community
H2 users
Support institutions
What are the support options open to UK
Government?
Which options most effectively satisfy the goals
of Government and the needs of stakeholders?
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Contents

• The challenge
• Hydrogen energy
• Government goals
• Stakeholder needs
• Options and recommendations

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Definition and scope of hydrogen energy

• Hydrogen energy covers all aspects of the use
  of hydrogen in energy systems
• Research and development in hydrogen energy
• Design and building of components for hydrogen
  energy systems
• Design and building the subsystems and systems
  themselves
• Operating and maintaining the systems
• Providing direct support of any form, e.g.
  consulting, fiscal incentives, standards
  development, education, public awareness,
  institutional and social aspects
• Transport, stationary energy and other
  applications are all relevant
• Other energy systems are not included (e.g. fuel
  cells using natural gas directly other
  renewable/energy storage systems)
• In the UK, the hydrogen energy sector is still
  evolving
• Primarily RD organisations, with some
  manufacturing and potential end users
• The whole supply chain is not well represented
• Scope exists for larger organisations to enter if
  the market develops

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Selected UK actors in hydrogen energy
Large/ influential organisations shown in bold
other includes finance, regional and national
government projects, consulting, etc. This is not
comprehensive
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There is a variety of support mechanisms for
hydrogen energy in the UK, though there is no
overall programme

• RD
• EPSRC has support for fundamental research
  (various programmes, totalling perhaps 1.5m/yr)
• DTI has some support under New and Renewable
  Programme, e.g. Advanced Fuel Cells (FC programme
  is up to 2m/yr, of which H2 is a very small
  proportion)
• Carbon Trust has some support (no specific
  amount, as proposals win on merit)
• End-use
• EST is able to give some support for transport
  (e.g. for the CUTE buses)
• Treasury has removed duty under the Green Fuel
  Challenge (very few projects have so far been
  able to take advantage)
• Enhanced capital allowances for hydrogen
  refuelling equipment and very low CO2 vehicles
• Some support comes from local initiatives
• The London CUTE project has funding from
  London-based organisations such as TfL
• International programmes exist
• EU funds for hydrogen energy research are
  accessed by some UK actors
• IEA participation allows knowledge-sharing rather
  than significant funding
• IPHE has yet to evolve

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Internationally, several countries have
well-developed support mechanisms for hydrogen
energy

• Examples of support mechanisms

National Hydrogen Commission currently working
on these areas
Not all programmes are shown
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Contents

• The challenge
• Hydrogen energy
• Government goals
• Stakeholder needs
• Options and recommendations

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We have spoken to 14 people across Government who
have an involvement in hydrogen energy
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Summary of Government perspectives on hydrogen
energy
All Departments agree a need for a clear,
credible strategic framework for hydrogen energy
in the UK, with Government facilitating the
development of the strategy

• Different departments have different perspectives
  on the main strategic reason for supporting
  hydrogen energy activities.
• A proactive Government role is needed

But..
UK resource availability is a limiting factor
Fragmentation and poor communication currently
hinder Government action

• All recognise the constraints, but few agree on
  the priorities
• International involvement is important
• There is an expectation that UK will need to
  focus on areas of skill expertise

• Hydrogen energy cuts across many areas of
  Government
• There is no clear framework for leadership and
  communication

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Interviewees agree the need for a clear, credible
strategic framework for hydrogen energy in the UK

• Government Departments think hydrogen is
  important but different departments have
  different priorities
• Climate change to meet 60 CO2 reductions,
  hydrogen makes the target potentially more
  attainable
• Particularly true for transport CO2 emissions
  which currently appears to be the most
  intractable to solve
• Security of supply and UK plc benefits are also
  important considerations for some
• Links to CO2 sequestration were mentioned by a
  couple of interviewees
• An overall position which balances the differing
  views would enable resources to be focused
  appropriately
• A proactive Government role is needed
• Do nothing has ceased to be an option
• Officials aware of significant activity levels in
  other countries
• All aware that UK funding is small

Hydrogen is potentially extremely significant
increases diversity of supply (particularly
transport) and can be a non-C energy vector
Modelling of 60 CO2 reduction shows post-2020
need for hydrogen in transport sector
It is tempting to think that Government should
have a strategy on everything, but hydrogen is
big enough and important enough
Momentum behind hydrogen in USA means that UK
needs more than watching option
USA spending of large amounts of money will
generate confidence with industry and probably
prove to be successful
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However Government has to face the reality of
available UK resources

• All Departments recognise the likely financial
  restraints but have different views on way
  forward
• Government should not provide major funding now
  but not do nothing
• No rush for mass deployment is required, but RD
  can be justified to bring forward the hydrogen
  option
• An expanded RD programme would be welcomed
• A major gap is at the Demonstration level
• Soft aspects must be included in research.
  Public acceptance of hydrogen energy has barely
  been tackled and merits more attention
• Government Departments appreciate the importance
  of international involvement on hydrogen activity
  as
• It shares the risks and improves the cost
  effectiveness
• Funds are becoming available at least at an EU
  level
• It permits informed and credible UK input into EU
  policy
• It helps UK maintain its strong science
  engineering base
• There is an expectation that UK will need to
  focus on areas of skill expertise
• A strategy is needed before deciding on
  appropriate Government activity and resources

Do not simply throw money at problem focus on
UK skills and strengths
UK cannot compete head-on with USA
A dispassionate view of the benefits of hydrogen
has not yet been seen
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Fragmentation and poor communication currently
hinder action

• Hydrogen energy cuts across many areas of
  Government and there is no clear framework for
  leadership and communication
• Officials are conscious that currently no
  champion Department or single point of total
  knowledge for hydrogen energy exists
• Officials openly admit that they dont know other
  Departments activities in detail
• Officials agree that there is little
  communication of the various international
  activities that the UK is involved with
• Officials are aware that no single point of
  contact for external stakeholders exists
• In transport, LowCVP is seen as the forum for
  improving communication, but this is only part of
  a hydrogen activity
• Several interviewees suggested that SEPN should
  play an over-arching role, but more favoured DTI
  being the lead Department
• There are too many funding schemes with limited
  funding

Confusion exists over DTI and Carbon Trust roles
Creating a single point of contact would reduce
the bureaucratic overhead and improve
communication.
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Other Government interviewees observations on
hydrogen energy

• The institutional and regulatory framework is
  important
• Codes and standards are an important area where
  the UK needs to be sure that its voice is heard
• The Concawe/ACEA approach, of setting
  environmental performance targets but leaving it
  up to industry as to how to meet them, could be
  important in bringing forward hydrogen
• RD should cover safety issues
• Need to address education/training infrastructure
• The new Energy Research Centre and the Scottish
  Energy Intermediary Technology Institute could be
  important in this respect

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Contents

• The challenge
• Hydrogen energy
• Government goals
• Stakeholder needs
• Options and recommendations

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We canvassed views from 21 non Government
stakeholders
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In summary, there is one over-arching requirement
and several that are specific to stakeholder types
Stakeholder Requirements of Government in the
Hydrogen Energy area
All stakeholders
A clear, credible strategic framework for
hydrogen energy in the UK, with proactive
Government backing
Industry
Research
Users

• Funding for demonstrations
• Clearer institutional and regulatory framework
• Simpler Government interface

• Consistent funding streams
• International partnerships
• Dont over-prescribe
• Educate the next generation
• Include soft aspects

• Ensure that RDAs do not compete unnecessarily

N.B. Support institutions have requirements that
are closely related to those of the stakeholders
that they support
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Most stakeholders see the need for a clear,
credible strategic framework for hydrogen energy
in the UK

• There is currently a feeling of uncertainty about
  where the Governments priorities lie
• Hydrogen could serve many objectives - which take
  priority?
• How does hydrogen fit within overall energy
  policy?
• The need to focus resources is accepted, but the
  basis for choosing this focus is not clear
• Stakeholders prefer to work with outcome-based
  targets, not very detailed plans
• Industry and other stakeholders believe they are
  effective at resolving technical and commercial
  issues
• Highly prescriptive approaches are less helpful
  to innovators
• Sensible targets are needed, set in collaboration
  between stakeholders and Government
• A proactive Government role is needed
• Do nothing has ceased to be an option
• Many stakeholders point to significant activity
  levels in other countries
• There is no government champion for hydrogen
  energy

We need clear signals from Government about where
fuel cells and hydrogen fit in a long term
framework. Then we can place our bets.
There is a need for serious analysis on where are
the best areas for limited investment
The USDoE is almost too prescriptive as it does
not reflect the level of uncertainty inherent in
the sector
The UK has not been a high priority for us, but
it is becoming more so with increased Government
interest
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Industrial stakeholders require stronger support
for early implementation of hydrogen energy

• Greater funding for demonstrations is needed
• Hydrogen energy is often about integration of
  systems, not technical breakthroughs
• Demonstrations need to be of a material scale to
  be meaningful
• Demonstrations provide valuable benefits
• The institutional and regulatory framework is not
  sufficiently developed
• Codes and standards are an important area where
  the UK needs to be sure that its voice is heard
• Planning regulations do not help to establish
  hydrogen infrastructure
• Safety aspects of hydrogen are poorly understood
• It is unclear which regulatory bodies will have
  responsibility for which areas
• A simpler Government interface would help
  industry
• It is not clear who is the point contact for
  hydrogen energy matters and how cross-Government
  communication occurs
• There are too many small schemes
• Access to EU funds should be enabled by Government

Demo programmes are very expensive and need to be
of a minimum size to make any difference
You do not need to do many demonstrations to
develop a useful lead
Council opposition in Hornchurch leads to caution
about whether the UK is a good place to be, with
so many other choices
One Government department should have lead
responsibility for hydrogen energy to avoid mixed
messages or the LPG duty situation
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The research community would like a broad,
long-term approach

• Maintaining consistent funding streams builds
  long term strengths
• Stop/start funding leads to loss of key staff and
  disrupted efforts
• Other countries have developed strong research
  programmes
• International partnerships are very important
• The UK stands to gain by working internationally
• Government can act as a bridge to international
  efforts
• Dont over-prescribe research directions
• There must be some responsive-mode funding to
  provide scope for innovation
• Include soft aspects in research
• Public acceptance of hydrogen energy has barely
  been tackled and merits considerable work
• Educate the next generation in hydrogen energy
• Hydrogen energy is a potentially big story with a
  potentially big skills gap. The Government
  should anticipate this gap and promote hydrogen
  energy education
• The next generation will be hydrogen consumers

The Dutch developed a long term hydrogen energy
strategy based on local strengths and then funded
it properly
The DTI fuel cell calls are too narrow (and are
not very well advertised)
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Users do not want to be in competition at this
stage

• Regional Development Agencies would like their
  efforts to be better co-ordinated
• RDAs see hydrogen energy as a means to achieve a
  mixture of economic growth and environmental
  objectives
• Each region has different natural advantages with
  regard to hydrogen energy and several are
  pursuing projects
• There is insufficient funding for all RDAs to
  pursue all objectives equally
• Most RDAs would welcome a national hydrogen
  energy strategy to allow them to focus their
  efforts

The current strongly regional model of support is
not helpful as it leads to unnecessary competition
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Contents

• The challenge
• Hydrogen energy
• Government goals
• Stakeholder needs
• Options and recommendations

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Overall options for Government action closely
match Government goals and stakeholder
requirements
Options for Government action in the Hydrogen
Energy area
Strategic framework
Set a clear, credible strategic framework for
hydrogen energy in the UK
Support programmes
Provide funding and guidance to meet the priority
areas within the strategic framework
Government organisation
International collaboration
RDA co-ordination
Hydrogen association

• Organise in support of the strategic framework

• Participate in support of the strategic goals

• Ensure co-ordination to meet the strategic goals

• Guide creation of an association to support the
  sector

Recommendations are highlighted yellow throughout
this section
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The strategic framework should lead to a clear
plan of where UK focus should be applied

• What are the UKs objectives for hydrogen energy
  activity?
• Linked to the Energy White Paper
• Clarify balance between environmental, UK plc and
  other objectives
• Consistent with existing fuel cell objectives
• When and how will hydrogen energy manifest
  itself?
• Areas of broad agreement
• Key uncertainties and trigger points that will
  determine their resolution
• UK strengths and weaknesses in international
  context
• On the supply side
• As a market
• Where should the UK focus?
• Where can it build sustainable competitive
  advantage?
• How can the UK build options to meet
  environmental objectives?
• Do other objectives imply additional areas of
  focus?

Recommended Elements of a Potential Hydrogen
Energy Strategic Framework
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Government support programmes are needed for
demonstrations, RD and regulatory issues

• Demonstration programme
• Early stage
• Pre-commercial
• International participation
• Research and development programme
• Academic
• Industrial
• Energy Research Centre ITI
• Directed and responsive-mode
• Technical and socio-economic
• Develop institutional and regulatory capability
• Codes and standards
• Planning regulations
• Safety
• Define role of regulatory bodies

Recommended Elements of Potential Hydrogen Energy
Support Programmes

• In every case consider
• Fit with strategic framework
• Who should lead within Government
• What kind of support required
• Magnitude of support needed
• Interface with other areas

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Government can play a significant role in
organising the UKs execution capability

• Key Elements to Reinforce Execution Capability in
  Hydrogen Energy
• Government organisation
• Lead department with clear face-offs to all other
  departments involved Suggestion DTI to lead,
  working within SEPN framework
• Provide strong, visible leadership for hydrogen
  energy alongside fuel cells
• RDA co-ordination
• How do the strengths of each region match the
  strategic framework for hydrogen energy?
• What is the best allocation of opportunities to
  minimise unnecessary competition?
• How can co-ordination be ensured going forward?
• International collaboration
• How could the international hydrogen energy
  initiatives (EU, IPHE, IEA etc) support the UKs
  strategic framework for hydrogen energy?
• What can the UK contribute that will be of value
  to others?
• What are the best mechanisms for engagement?

Recommendations
Government to resolve this as strategic framework
develops
Government to guide these in line with the
strategic framework, via a hydrogen energy focal
point
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Government could influence the creation of an
association to support hydrogen energy

• Interviewee Views on a UK Hydrogen Energy
  Association
• Background
• H2Net provides an academic and industry network
  on hydrogen energy issues. Although attendance
  is broad, it is perceived as being academic in
  focus
• Fuel cells UK includes within its constituency
  several organisations which are hydrogen as well
  as fuel cell focused
• A Scottish Hydrogen and Fuel Cell Association was
  announced in late 2003
• The European Hydrogen Association (EHA) and the
  Partnership for Advancing the Transition to
  Hydrogen (PATH) each link several national
  hydrogen energy industry associations
• There is no clear consensus about the best means
  to organise hydrogen energy support
• Only 1 interviewed party was against any
  organisation at this stage 5 were for a separate
  hydrogen energy association (most of these
  expressed a preference for close co-ordination
  with fuel cells) 9 were for a combined fuel cell
  and hydrogen energy association 11 expressed no
  strong view and 8 expressed no view at all
• The majority view recognised that having separate
  organisations serving fuel cell and hydrogen
  energy interests in the UK might be difficult to
  sustain at this stage
• Several interviewees pointed to the proliferation
  of related organisations in the UK (H2NET, Fuel
  Cells UK, FCForum, SHFCA, FCNetwork) with many
  more at international level
• In developing our recommendations we took note of
  the facts that
• There was strong opposition to this view from
  some quarters
• The best form of a combined organisation was not
  pursued and did not emerge unprompted
• The Scottish/regional dimension cannot be ignored
• The path chosen may have implications for
  participation in the EHA and PATH

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What would a UK hydrogen association do?
Recommended Vision for the Association

• To bring forward the commercialisation of
  hydrogen energy in the UK
• Be a forum and contact point for its members on
  hydrogen energy
• Be a network for members to keep up to date with
  industrial and research developments
• Build consensus around priorities and influence
  Government policies and programmes accordingly
• Act as a clear and convincing advocate with
  Government, the media and international bodies
• Act as a bridge to international hydrogen energy
  activities
• Contribute to the development of hydrogen safety
  codes and standards in the UK and which are
  consistent with international standards
• Contribute to education and outreach activities
  to prepare the UK market and public opinion
• Offer advice and information to its members on
  existing activity and research opportunities in
  the hydrogen sector
• Represent the members of the association and
  maintain strong relationships with other
  associations having similar interests
• At this stage, the role would not extend to
  other traditional trade body activities such as
  advice on legal, taxation, contractual and
  employment matters, or endorsement of products
  and services

Recommended Role of the Association