Hydrogen's value in the energy system (HYVE)

This project will assess the potential value of hydrogen to the UK as part of a transition to a low carbon economy. It will assess the potential demand for and value of hydrogen in different markets across the energy system and will analyse the supply chain required to produce and deliver that hydrogen, including the supply of hydrogen from using electrolysers for load balancing in the UK electricity system with a high penetration of renewable electricity.

In the short-term, hydrogen electrolysers can support electricity system load balancing as the proportion of intermittent renewables increases. The Universities of Edinburgh and Reading have led efforts to characterise the UK wind power resource and to understand how new developments can be incorporated into the UK electricity system. This project will extend the models developed at these institutions to assess the indirect value of hydrogen in supporting a high penetration of renewable electricity by avoiding electricity network reinforcement. It will also link these models with the UK energy system model at UCL (UK TIMES) to assess the direct value of electrolysed hydrogen to companies, if the hydrogen is used in the gas network (power-to-gas), as an industrial feedstock, as a transport fuel or for large-scale storage as part of the electricity system. The models will identify the most appropriate locations for electrolysis deployment and the timescales on which they should be deployed.

In the medium-term, the most important use of hydrogen is likely to be in the transport sector. UCL has recently examined how a hydrogen supply chain might develop across the UK using a new spatially-explicit infrastructure planning model called SHIPMod. This project will add a number of new features to this model including hydrogen pipelines and finer temporal disaggregation to link with the electrolysis parts of the network models developed at Edinburgh. It will be used to assess the value of hydrogen supply infrastructure and will identify the optimum deployment of infrastructure across the UK.

In the longer term, hydrogen is a zero-carbon option to replace natural gas for heat generation. UCL have examined the potential for converting the natural gas networks to use hydrogen and to examine the long-term prospects for micro-CHP to replace boilers. This project will build on this research with the aims of: (i) assessing the value of hydrogen to the UK for heat provision; (ii) understanding the impact of hydrogen on the gas distribution networks; and, (iii) examining how using hydrogen for heat as well as transport would impact the development of a hydrogen supply infrastructure.

Hydrogen infrastructure represents a risky investment in the early stages of a transition because of the highly uncertain future uptake of hydrogen vehicles. It is important to factor the cost of this risk into the value of hydrogen. We will use a mixture of real options and stochastic programming analysis, using the UK TIMES energy system model and the SHIPMod infrastructure planning model, to account for and manage risk in different scenarios (including using hydrogen only for transport or using it for both transport and heat). Hence we will identify scenarios with lower investment risk and we will identify policies that will reduce these risks and facilitate the development of a hydrogen economy.

This project will build on existing research projects, including using models developed by the EPSRC H2FC Supergen Hub and the EPSRC Adaptation and Resilience in Energy Systems (ARIES) project. Funding for hydrogen research in the UK is currently almost exclusively focused on technology development and this project will fill an important gap in the funding landscape by taking a whole systems approach to understanding the potential role of hydrogen in future UK low-carbon energy system configurations.

Hydrogen has the potential to be a critical enabler for the UK's renewable energy plans as an energy storage medium and the government has identified hydrogen electrolysis as a key technology to deal with intermittency. The government will be able to use the insights and the models that we create as evidence to inform policy decisions about the electricity network, in particular policies that minimise energy costs, maximise decarbonisation and avoid unintended consequences of stranded technologies. Electricity supply companies will be able to use the tools that this project creates to inform investment decisions, which is why National Grid, SSE and SGN, who between them own the UK electricity and gas transmission networks as well as several distribution networks, are partners of this project. Electricity network reinforcement is expensive and unpopular with the UK public and this project could lead to fewer new power lines and a more secure electricity supply, which could also improve the public opinion of renewables and accelerate roll-out of low-carbon technologies.

H2Mobility, a consortium of the UK government and industrial partners, has stated that commercial hydrogen-powered vehicles will be introduced in suitable markets from 2015 and that prompt action is important to ensure that the potential economic and carbon benefits of hydrogen transport are realised within the UK. Investments into supply infrastructure are currently difficult to justify because the overall value of hydrogen to the UK, and to the many companies in the supply chain, is opaque, but hydrogen vehicles cannot be used without these investments. This project will take a whole systems approach to hydrogen and will value hydrogen as an integral part of the wider UK energy system. The energy systems and spatially-explicit infrastructure planning models that we develop will account for safety regulations and other considerations relating to infrastructure development, and will thus be able to produce practical and viable plans for hydrogen infrastructure investments with demonstrable value across the hydrogen supply chain. Air Products, a project partner and a member of H2Mobility, will help us to ensure that our outputs address these investment issues.

One issue for companies is that the demand for hydrogen in future scenarios varies substantially depending on the long-term costs of resources and whether cost reductions in hydrogen vehicle components and supply infrastructure are achieved. The management of uncertainty is a key factor for the development of hydrogen but it has not previously been investigated in whole energy system studies. This project will assess the impact of these uncertainties on investment costs and will develop strategies to reduce these uncertainties and share the risk across the hydrogen supply chain. It will provide the evidence that companies need to inform hydrogen investment decisions.

Heating produces a third of UK CO2 emissions and decarbonising heat is a key challenge. In its recently-published Heat Strategy, a key uncertainty identified by the government is the role of hydrogen in meeting the UK low-carbon and security of supply objectives. This project will assess the role of hydrogen and will also enhance our understanding of the potential for converting the gas distribution networks to deliver hydrogen, which is of great interest to the network owners because they could otherwise be decommissioned.

UK consumers are becoming more engaged in the operation of the energy system and already interact with mechanisms such as feed-in tariffs and the renewable heat initiative. Consumers are aware of the general concerns around sustainability of road transport and there has been much interest in alternative fuel vehicles for reducing both carbon and NOx emissions. We will assess the potential value of hydrogen for these purposes and will communicate our findings to the public through the project website.