Hydrogen “hard to beat” but UK lacks incentives, says Mission Control boss

Chris Stark, who is tasked with implementing the UK’s clean power plan, has said government will explore using methods usually used for financing nuclear and renewable energy projects for hydrogen storage.

“For the really long duration energy storage at the moment… it’s hard to beat hydrogen as a low-carbon energy store that works well with a renewable-power system,” the head of Mission Control said at a committee meeting in Westminster.

“We have already acknowledged that we have not put all the market mechanisms in place to deliver what we need to. At the end of this, there will have to be something that gives the incentive to store that hydrogen, because the incentive is not there at present, and the stores are huge.”

Stark admitted that there is no “policy framework in place” to support the as-yet-unproven hydrogen storage industry.

The government said in October that it intends to hold the first round of a cap-and-floor mechanism in 2025 for long-duration energy storage (LDES).

It said the mechanism will support technologies including pumped storage hydropower, liquid air energy storage, compressed air energy storage and flow batteries, but excluded hydrogen storage.

Energy secretary Ed Miliband confirmed at the committee hearing that the government is “moving forward with the hydrogen storage business model”.

According to market engagement documents, a separate mechanism for hydrogen storage would require new or converted hydrogen storage facilities to be operational by 2028-2032.

Stark said at the Environment and Climate Change Committee and Science and Technology Committee in Westminster this month that possible options for financing hydrogen storage include a regulated asset base model (RAB), as used for nuclear, or contracts-for-difference (CfDs).

He added that government would seek to bring this through “over the course of this parliament”.

“It might be something that looks like a regulated asset base, or a contract for difference, but something that gives the long-term certainty to allow us to have that strategic store is going to be needed into the 2030s,” he said.

CfDs have been used to finance renewable energy projects including wind and solar for over a decade, offering a fixed price for power.

The RAB funding model for nuclear power stations, where the cost burden is shared with the consumer, was brought in by government in 2022, and concerns have been raised around the cost to the taxpayer of transferring the Sizewell C funding model to an RAB.

Hydrogen storage has been proposed as a way of storing energy produced by renewable energy plants during times of high wind and solar irradiation, for redistribution when needed.

The UK spends millions of pounds each week on balancing mechanisms and importing electricity through interconnectors from Europe to meet power needs.

Proponents of hydrogen storage view it as a solution to decarbonising gas infrastructure and managing volatility in the grid.

Academics have warned that not all locations are suitable for hydrogen storage and that leakage can occur.

Hydrogen is a volatile gas, producing zero carbon on combustion, but it can ignite easily. It is also not wholly efficient. The most efficient electrolysers in Europe command efficiencies of only up to about 80%.

‘Not oppositional’

Gas companies Centrica (LON:CNA) and Kistos Energy (AIM:KIST) are both exploring ways of retrofitting existing natural gas storage facilities to accommodate hydrogen.

The parent company of British Gas, Centrica, has said it wants a cap-and-floor mechanism for its plans to spend £2bn on the redevelopment of the Rough gas storage facility in the North Sea, which warehouses half of all UK’s stored gas, to convert it to hydrogen.

© Supplied by Centrica

In its policy position statement, Centrica said: “By extending the cap and floor regulatory framework that has successfully enabled private investment in the UK energy interconnectors, government can encourage investment in storage.”

Miliband said it was important not to “dismiss” using the LDES cap and floor mechanism, based on the mechanism that has been running for interconnection for a decade.

He added: “We are not oppositional; we are open-minded about this, and we think that the work we are doing on the hydrogen storage business model is an important step on the road.”

In December, Centrica’s chief executive warned that it was expecting to make a loss from the Rough storage facility, which was brought out of dormancy during the energy crisis, forecasting an operating loss of £50-100m for the store in 2025.

It will be able to operate the Rough facility until 2030, which is when the extended licence for the rig ends.

While most hydrogen storage projects in the UK are based on the use of underground salt caverns, Centrica’s Rough project is looking to repurpose a depleted offshore gas field. Experts at the University of Aberdeen have raised concerns about using depleted gas fields due to the “small, nimble” nature of hydrogen molecules.

Several UK firms are looking at developing sites for hydrogen storage, including UK Oil & Gas (AIM:UKOG) which is developing a salt cavern project in South Dorset.

Meanwhile, SSE and Equinor are also progressing the Aldbrough Hydrogen Storage project in the Humber, a redevelopment of an existing gas storage facility.

Kistos is another company exploring the conversion of gas storage facilities to hydrogen.

A spokesperson said that the company’s “primary focus for Hill Top and Hole House is on natural gas storage and trading”.

“While there is the potential to convert these assets for hydrogen and compressed air storage, this is not a near-term focus, although it may be considered further down the line,” the person said.

Centrica was approached for comment.