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Hydrogen: The Invisible Option and the Missing Piece of the Net Zero Puzzle?
Hydrogen is exciting! As someone with a keen interest in how I can make changes to the way I live to reduce my carbon footprint I have noticed the growing awareness and publicity of this sector. Hydrogen is being termed as a central piece of the net zero puzzle (a puzzle that is becoming ever more challenging yet important), momentum is strong and industry players across the sector are willing and eager to invest.
Lichfields is working in the sector and is speaking to clients about hydrogen proposals and what the sector may look like in the future. So what are the implications for the planning sector and what role does and will a planning consultant play on hydrogen projects?
In this blog, we look at what hydrogen is, why it is identified as a solution and an opportunity for reaching net zero and what the challenges, unknowns and questions are for planning. We are keen to engage further with key stakeholders so please do get in touch.

 

What is Hydrogen?

Hydrogen is an invisible gas, estimated to contribute to 75% of the mass of the universe. Hydrogen is present in nearly all molecules in living things. It can be produced from a variety of resources, such as natural gas, nuclear power, biogas and renewable power like solar and wind.
Hydrogen comes in many colours and the different colours intend to provide information about how hydrogen is produced. The primary colours include grey, blue and green. Grey hydrogen is generated from natural gas through a process called steam reforming, producing GHG emissions. Most of today’s hydrogen is grey. Blue hydrogen is generated during the steam reforming process, a high proportion of carbon generated is captured and stored underground. Green hydrogen is made by using electricity from renewable sources to split water molecules into hydrogen and oxygen. Green hydrogen is the most spoken about in the sector at the moment.
Key players in the hydrogen market are terming hydrogen as ‘clean, powerful and abundant in nature’ as well as a ‘force of nature’.

An Option and Opportunity?

Achieving the net zero target by 2050 is challenging and it is going to fundamentally change every business and the way we go by our day-to-day lives.
Switching to cleaner hydrogen energy can meaningfully support the transition to a net zero future and the Government and many key stakeholders have published strategies to support this ‘switch’. There is a Hydrogen Council and our Government published its Hydrogen Strategy in August 2021 and its Hydrogen Roadmap in April 2023. In a net zero world, demand for clean hydrogen could reach approximately 22% of our final energy demand.
In real terms, the production of hydrogen includes the following stages:
Hydrogen could be used in the following sectors:
  1. Heat – by replacing natural gas and providing low or zero carbon heat for buildings and industrial uses.

  2. Transport – by replacing fossil fuels in sectors where electrification is not possible or practical (heavy goods vehicles, buses, trains and even ships and planes). This is likely to be the largest segment of the sector in 2050. Hydrogen can be scaled to fully decarbonise sectors, for ground mobility it can complement electrification, through batteries that require long ranges and swift refuelling.

  3. Industry – by replacing fossil fuels as reducing agents in steel making.

  4. Power – used to store low cost excess renewable electricity. This in turn would increase short term and seasonal system flexibility (i.e. during colder winters) and would support the integration of a high level of renewable generation in the energy system. It can also provide energy resilience by delivering continuous grid operation by balancing demand with supply. Hydrogen can be moved from source to where it is needed.
What is clear from our discussions with stakeholders in the sector is that the ambition is here, and it is here now. The Government has doubled its hydrogen ambition from 5GW to 10GW of low carbon hydrogen capacity by 2030, with at least half of this coming from electrified hydrogen. Last year the Government launched its first hydrogen allocation fund offering capital support from its Net Zero Hydrogen Fund and it has funded the study of different hydrogen projects around the UK, including but not limited to Gigastack, Hynet, Aldbrough Hydrogen Storage (which Lichfields is involved in), Octopus Hydrogen and Carlton Power

The Government’s roadmap sets out its ambitions for the next 10 – 15 years. Technology wise this is linked to production, hydrogen networks and use, starting off on small scale projects and end uses such as buses, early HGVs and neighbourhood heat trials to the mid 2030s when the aim is to increase the scale and range of production with regional and national networks and it being used within a full range of sectors. The Government recognises the need for policy support which is promising, including regulatory frameworks, market frameworks, grant funding and research and innovation.
So how do you bring innovations forward to a real world reality? What is clear from our research is that it needs investment and policy support to establish demand and reduce cost so it becomes a viable alternative. We also need a buy in from the public and private sector to incentivise the transition, support initial economic hurdles and set common standards across industries and geographical areas.

 

What are the implications, challenges and unknowns?

As with any emerging technology and sector, there are a lot of unknowns. Looking at this holistically, these include cost, technological advances, the need for ‘first of a kind investment’ and training and upskilling people. What will development actually look like, what land take and infrastructure will be needed, are there any locational requirements, what about grid connection and transportation, what about new development requirements and retrofitting and what about safety.
From our view and from a planning perspective what is clear is that to embed hydrogen and allow it to become a ‘piece of the puzzle’, a simple joined up policy and regulatory framework is needed and quickly. We need a clear and consistent direction from the Government to give confidence and certainty, whilst remaining flexible to adapt to new opportunities.
Within such a framework, it is our view that the following needs to be considered:

 

  • A national policy position within the National Planning Policy Framework (‘NPPF’) and in National Policy Statements. Positively, the Government has updated its National Policy Statements and NSP1 (Overarching Statement for Energy) sets out the Government’s position on hydrogen. NPS1 came into force last month. This sets out the in principle need, support and demand for hydrogen in meeting the net zero objective. It recognises that the energy system needs transforming to increase the supply of clean energy, such as hydrogen. Substantial weight should be given to need. The Government’s view is that a twin track approach of developing both green and blue hydrogen production will be needed to achieve the scale of production required for net zero. NPS1 also states that the Government is committed to providing more information on hydrogen planning, relevant to planning, and including guidance documents. We will watch this space! Will greater emphasis be given in the forthcoming planning reforms?

  • A clear route and set of requirements for local planning authorities – whether this be in the form of their own hydrogen commitments, investment plans and, or local planning policy requirements or supplementary planning guidance. At present, authorities have net zero policies, an example being a commitment to achieving a certain percentage of energy needs via a renewable energy source. Is this enough? What about site allocations and supporting developments and infrastructure? Hydrogen focused policies are needed quickly. How many authorities will be or will not be progressing local plan reviews to capture such policies?

  • Education, knowledge sharing and community engagement. This will be extremely important, especially the need to educate local communities. As with other forms of renewable energy, the Government needs to set a positive framework that allows communities and future developers to work together rather than place the decision on whether a development should come forward on the basis that impacts on the community have been ‘fully addressed’.

  • Leading on from community engagement, there is a general perception that hydrogen is not safe. Is there a role for the Health and Safety Executive (‘HSE’) and what is that? When submitting a planning application for any form of hydrogen development, should it be accompanied by a health and safety assessment, and will this be a validation requirement? What needs to be included in these assessments and who can undertake them?

  • Our blog has not touched on the exact types of hydrogen development and what they might look like (i.e. the type of development that is needed to charge a HGV versus a plant to heat a warehouse or supply electricity to an industrial unit). Are there any locational requirements and supporting or enabling infrastructure and development? Where are the strategically important locations and what communities will they serve?
Other stakeholders in the energy and planning sector have provided their own view on the way forward for hydrogen, including RenewablesUK. The key message is that the planning system needs an “overhaul”, noting there is limited national planning guidance specific to green hydrogen (i.e. that being made from renewable sources).
We are continuing to meet with clients and key stakeholders to understand the exact requirements for hydrogen projects and planning requirements and please do get in touch with your own view.
Hydrogen is exciting! We should act now to benefit from this energy opportunity.

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The rise in demand for Private Wire Energy
Against a backdrop of volatile, uncertain market conditions and the emerging climate crisis, the importance of economic viability and environmental sustainability is as important as ever.
In recent times, businesses have had to delicately balance these two issues. Whilst many understood the necessity to reduce carbon emissions – either by virtue of ethical intuition or through force-by-policy – such objective needed to be facilitated in a financially stable manner. This meant finding a way to reduce carbon emissions, without significant (or any) rises in costs.
Now, this balancing act has transformed into a mutually beneficial objective for many businesses – by pursuing environmental savings, the business is able to reduce costs, and reduce them quite significantly! Introducing private wire energy – also known as power purchase agreements (PPA). A PPA is a deal between an energy provider (commonly from the renewables sector) and a private business seeking to acquire energy without the cost and constraints of standard grid energy. The energy produced by the renewable development is fed directly into the beneficiary, rather than into the grid network.
Whilst PPA’s are visibly favourable for both private businesses and energy developers, as explored below, the development of these schemes continues to face planning constraints due to issues such as landscape and visual and loss of agricultural land. To support private wire developments, Lichfields have developed an evaluation framework – Wired – which assesses the substantial economic, energy and environmental benefits that such schemes could deliver, providing material considerations in the planning determination. Further detail on Wired is provided at the end of this blog.

Energy Costs

The average non-domestic energy cost per KWh across the UK has almost doubled over the last year alone (Figure 1). This represents an unprecedented increase in operating costs for energy intensive businesses, but inelasticity factors caused (in part) by wider market conditions means affected businesses are unable to recoup these costs elsewhere. This is a leading factor in the government declaring the need to control UK energy to avoid “being held to ransom with energy supply” in the future. By internalising energy supply, both at a business and macroeconomic level, the risk of price volatility is markedly reduced.

Figure 1: Rise in Energy Costs for non-domestic businesses

Source: Department for Energy Security and Net Zero – Energy Prices: Non domestic Prices

Consequently, it is clear that price is a driving factor for businesses seeking to acquire a PPA. Rather than being held to the uncertainty of price fluctuations, businesses with PPA deals typically agree a fixed rate for the energy throughout the operational lifetime of the renewable development. Further, the rate of this energy is at a fraction of the price that standard grid energy is otherwise.
Evidently, the savings generated by the PPA agreement will be substantial over the course of a typical renewable scheme life cycle (20 – 30 years). If applied, these savings could be used, for example, to support additional employment; investment into research and development; and provide the foundation for overall business growth – embodying the term ‘sustainable development’ in its most literal sense.

Environmental Targets

The UK is legally bound to the achievement of net zero by 2050 as part of amendments to the Climate Change Act (2008). As part of this drive, the government has implemented a number of strategies, legislation and rules for businesses to adhere to. One such regulation is the ‘Government Greener Rules’, which requires all companies bidding for government contracts worth more than £5m per annum to commit to achieving net zero by 2050. It also requires businesses to demonstrate progress against this target by achieving milestone reductions at set intervals.
Given that grid energy is comprised of 35% - 50% from non-renewable sources, it comes as no surprise that consuming grid energy has a comparably high carbon footprint. For energy intensive businesses, such as those within the manufacturing sector, the consumption of grid energy leads to a large associated CO2 output, which is likely prohibitive for businesses aiming to achieve net zero. If, as a result, these businesses are unable to bid for major government contracts, there could be direct financial consequences by not transitioning towards renewable energy consumption.
One alternative but short-term solution to this issue is the consumption of renewable-certified grid energy – a certification that confirms all the energy a business consumes from the grid is derived from renewable sources. Whilst this does provide a sharp reduction in carbon emissions relative to standard grid energy, it still possesses a small associated carbon output and therefore continues to be a limiting factor for businesses aiming for net zero. It is also typically more expensive than standard grid energy and, as such, is often not considered as a sustainable option in the long term.

 

Energy Constraints

Although more prevalent in some areas rather than others, energy supply constraints can cause real issues with permitting major new developments in local areas. For example, data from the UK Energy Research Centre indicates that over 20% of industrial sites in the Electricity North West and Western Power Distribution networks are likely to be constrained in terms of electrical capacity[1]. Not only does this hinder economic development by preventing new development, it also risks wider energy issues such as power cuts.
The approval of a PPA scheme therefore provides additional energy supply in the local area. Despite this energy feeding directly into a business, it indirectly unlocks a level of spare capacity in the wider grid network as that business is considerably less reliant on the grid. This contributes towards alleviating pressure off the grid, which could indirectly support the potential for future development and secure stability of grid energy.

 

How we can help

Our new framework – Wired – provides a comprehensive economic, energy and environmental assessment of PPA schemes. Within an assessment, the benefits outlined above are quantitatively modelled using forecasting analysis. This can be used to illustrate the potential cost savings and carbon reductions that could be unlocked by the approval of the private wire development. Using this information, it is then possible to present a number of positive ‘spin-off’ scenarios, highlighting how the approval of the development can lead to long-term significant economic benefits across the local and regional economy. This presents a material argument in favour of development and therefore supports the planning application.
Please get in touch if you would like to discuss how the team can help you.

[1] https://ukerc.ac.uk/news/will-electricity-network-constraints-hamper-the-decarbonisation-of-uk-industry/

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