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UK takes on hydrogen: A new generation of risk

In this article, we outline the main types of hydrogen, the UK government’s present stance on the industry, and risks associated with hydrogen production.

23/11/2021 · 6 minute read

Low-carbon hydrogen is an essential part of the UK’s strategy to achieve net zero by 2050, with the government aiming for a production capacity of 5 gigawatts (GW) by the end of the decade. There are high hopes that hydrogen will eventually provide a clean source of fuel for homes, transport and industry, especially in sectors that are hard to decarbonise.

In this article — the first in a three-part series on hydrogen in the UK — we outline the main types of hydrogen, the UK government’s present stance on the industry, which sectors are likely to be first movers, and risks associated with hydrogen production.

Types of hydrogen

A number of methods can be used to produce hydrogen, but grey, blue and green hydrogen are most in scope at the moment.

There are 37 hydrogen projects currently planned in the UK, 37 in the US, 26 in Germany, and 20 in Spain. Only Australia has more hydrogen projects in the pipeline, totalling 51, according to Marsh research.

The UK government, however, intends to take hydrogen production to a whole new level. As laid out in a 10-point plan and the UK Hydrogen Strategy, the government is targeting growth in low carbon hydrogen to cut 9% of 2018 UK carbon emissions between 2023 and 2032. The aim is to attract £4 billion of investment to the hydrogen economy and create 9,000 jobs by the end of the decade.

UK’s hydrogen timeline

2022

  • Launch the £240 million Net Zero Hydrogen Fund to support early hydrogen production projects.
  • Finalise the UK standard for low-carbon hydrogen.
  • Finalise hydrogen business models, enabling first contracts to be allocated from Q1 2023.

2023

  • Complete testing necessary to allow up to 20% blending of hydrogen into the gas distribution grid for all homes on the gas grid.

2025

  • 1GW of hydrogen production capacity.
  • Large village hydrogen heating trial; set out plans for a pilot hydrogen town before the end of the decade.

2030

  • 5GW of low carbon hydrogen production capacity by 2030 for use across the economy.

Who will be first?

Currently, hydrogen production in the UK usually forms part of another operation. For example, hydrogen is used during refining in the petro-chemical industry and also to produce fertiliser.

Aside from these activities, the UK’s “hard-to-abate” carbon-intensive industries will probably provide the earliest demand. These include cement, steel, and heavy-duty transportation, such as trucking and container shipping.

In October 2021, the UK construction equipment maker JCB agreed to buy billions of pounds of green hydrogen made by the Australian company Fortescue Future Industries (FFI). The hydrogen will be produced in Australia and then shipped to the UK.

This deal demonstrates a key feature of hydrogen production — that intermittent supplies of wind and solar energy in one country can be converted into hydrogen and stored, and then transported at a later date to another country, where it can be used as an energy source.

Hydrogen is a particularly suitable fuel for freight transport vehicles, for example, as the power demands of long journeys are high and the amount of batteries needed would be too heavy to make an electric solution viable. Hydrogen, on the other hand, is a light source of significant energy.

Key risks

Hydrogen offers many possibilities —  as well as powering trucks, it can also be used to decarbonise industrial processes, heat buildings, and fuel cars, aeroplanes, and trains — but its production is expected to bring new risks, some of which are considered below.

  1. Fires and explosions

    Gaseous hydrogen can be compressed into long cylinders that are stacked on trailers for transport and can be stored in liquid form in storage tanks. Ruptures of tube trailers or tanks can cause fire or explosions. Hydrogen burns in the air with an invisible flame. Hydrogen detection sensors and emergency shutdown systems can be used to manage explosion and fire risks.

  2. Leakage

    Given the small size of the hydrogen molecule, it cannot be transported using the UK’s existing pipelines without the risk of leakage. Leaks are expensive, while a build-up of hydrogen in a poorly ventilated or enclosed space could result in an explosion. The present infrastructure may be able to be modified at a relatively low cost to carry a 20% hydrogen natural gas blend.

    Given the comparatively small size of the UK, and a concentration of population in the greater London area, a decision may be taken in future to build a new network to transport hydrogen within the country which could be more cost effective.

  3. Technological risk

    Many hydrogen projects are small-scale with limited volumes of manufacturing capacity. Applications still need to be proven at scale before they can be widely deployed.

  4. Metal and steel embrittlement

    High-strength steels and metals in contact with hydrogen can become brittle, which could lead to equipment failure.

  5. Supply chain risk

    Users deciding to import hydrogen to the UK enter a complex supply chain. They rely not only on producers but also on the small number of shipping companies that are able to transport hydrogen. There is no trading in hydrogen as yet, so it is not available on the open market if there is an interruption to supply.

  6. Business interruption risks

    Loss or damage of an electrolyser could halt hydrogen production. Given potentially long wait times for equipment — which could reach several years in the near future — business interruption exposure may be significant.

    Safe processes and risk management are going to be vital going forward to reduce the frequency and severity of hydrogen-related accidents and to maintain reliable hydrogen supplies. Insurers are likely to be at the forefront of the conversation as the hydrogen transition gets underway.

In our next article on the UK’s hydrogen industry, we will examine the challenges of a hydrogen strategy, including cost considerations.

If you have any questions about hydrogen risk, please contact your Marsh adviser.

Meet the authors

Photo © Joel Chant www.joelchant.com Tel/Fax:020 8509 7928 Mobile: 07976 291 576 email: info@joelchant.com 15/10/10 - UNP- 26005- Marsh Ltd Marsh Marine & energy Practices - business heads shots

Andrew Herring

CEO, Energy and Power, Marsh Specialty UK

  • United Kingdom

Mark Heneghan

Mark Heneghan

Global Hydrogen Practice Leader

  • United Kingdom

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