Is hub and spoke the solution to the UK’s hydrogen dilemma?
Gavin Watson writes
Innovation, coupled with robust policy frameworks and wangle to long-term sustainable financing, present the perfect conditions for the next generation of renewable energy sources to sally and flourish. This is a sweet spot rarely achieved in a country frenzied by estranged energy commitments and an urgent demand to unhook short-term energy security.
The state of hydrogen
The UK’s hydrogen sector in particular faces a unique rencontre in its failure to vamp both the policy and private financing necessary to play a near-term role in meeting the energy transition rencontre – despite the levels of innovation and excitement that fuel conversations virtually its game-changing potential.
That is not to say that the hydrogen market hasn’t started to mature. Some investors have been willing to when projects that will take significant time to come online, and longer still to generate a return. However, what the sector ultimately lacks is certainty, which is not a recipe for success when asking financiers to sink large amounts of money into an emerging and infrastructure-hungry sector. In the firsthand future, the hydrogen market will protract to rely on Government subsidies, particularly virtually offtake price and volume to underpin the scale-up of electrolyser production and topics and to lay the groundwork for minutiae of hair-trigger hydrogen infrastructure.
Beyond the short-term financing mechanisms and policy frameworks required to unhook the UK’s hydrogen target of 5GW production by 2030, the UK would be remiss not to consider raising a “hydrogen hub and spoke” model when looking at mechanisms to encourage and support the broader and longer term minutiae for the hydrogen sector. Such a model would combine economic self-ruling zone concepts (the hub) with hair-trigger national infrastructure thinking (the spoke).
Developing the hub
Green hubs centred virtually renewable energy worriedness offer untapped potential to promote investment and streamline the UK’s untried energy innovation and output. The megacosm of such a hub involves the concentration of untried energy sources and solutions – in the specimen of a ‘hydrogen hub’ this could include hydrogen production, hydrogen storage, hydrogen power generation and/or storage of renewable power in hydrogen fuel cells some or all co-located in the same area.
A hydrogen hub can act as a centre for innovation, creating momentum for the minutiae of new hydrogen technologies and products by co-locating like-minded individuals and businesses from within the hydrogen sector in one geographic location. The hub construct is dependent on wangle to a significant and reliable volume of hydrogen, particularly as this overcomes firsthand barriers in transportation of the energy source to hydrogen-related worriedness wideness the rest of the country. When choosing the location for a hydrogen hub, it is logical to squint at existing low (or zero) stat centres. In the specimen of hydrogen, targeting existing projects with stat capture and hydrogen production infrastructure allows for the hub to evolve virtually an existing source of hydrogen. Going forward, we should be exploring options to develop hubs based on untried power sources looking closely at where those sources (primarily wind and solar) are located. Often these renewable power sources are increasingly remote, which arguably favours minutiae of hydrogen hubs in those locations where planning issues may be increasingly limited and local economies require new investment to stimulate growth and regeneration.
The success of a hydrogen hub to generate demand for the sector is dependent on the necessary financial incentives to vamp innovators, developers, and other stakeholders to move to the site. Government support and transferral to the hub model is hair-trigger here, as the hub will need (and will need to offer) financial incentives to get established and proceeds traction. The government could explore tax unravel options for businesses, in wing to credits for R&D expenditure on hydrogen minutiae as an spare stimulus for innovation. Rent subsidies (or holidays) offer a remoter measure to foster the necessary economic climate to yank in the individuals and businesses pioneering the transition.
Driving demand
By concentrating activity, innovation, and momentum overdue a burgeoning energy source within one geographic location, the hub has the potential to generate major demand for hydrogen wideness a range of potentials investors. Hair-trigger to this mission, however, is getting hydrogen to the point of offtake.
Investors in hydrogen production developments need to be convinced that use specimen of the hydrogen produced is sufficiently robust if they are to provide the funding required for the scale of hydrogen production necessary for the energy source to take flight. There has been significant progress in near-term use cases in the conversion of hydrogen to ammonia given the established markets for fertilizer products; its use for marine fuel markets; and for use in hydrogen fuel cells. Its potential in the aviation sector is once attracting investment, with Manchester airport presenting an heady opportunity for minutiae of the aviation use specimen and telescopic to develop a uncontrived hydrogen pipeline (from a low stat hydrogen production hub) to supply increasingly than 60 airlines with low-carbon volitional fuel. The diversification of sectors benefiting from hydrogen is hair-trigger to uplift demand in the near-term and should be inside to innovation. Near-term applications must be considered in tandem with future, longer-term hydrogen uses currently at incubator stage to generate demand.
The economic climate
Building on the financial incentives to vamp innovators to relocate, the Government must moreover nurture the right economic eco-system virtually the hub to maximise innovation and minutiae potential. The economic self-ruling zone concept presents the optimal model to create this environment. Under this construct, a geographic zone for the hub would be identified and a suitable package of economic benefits and inducements made misogynist to businesses operating in the designated zone through towardly legislation and regulation.
Typically, the founding legislation would also, in conjunction with implementing rules and regulations, seek to simplify the corporate set-up and registration requirements for the zone, reducing associated timeframes and costs, and where possible introduce real-estate incentives to encourage presence in the zone slantingly financial and tax incentives to encourage minutiae of innovation, R&D collaboration within the zone. The economic zone is then built and curated to offer the optimal conditions to catalyse hydrogen innovation and technological minutiae within the hub.
A global perspective
The economic self-ruling zone model has been unromantic globally to unzip a range of policy objectives – from economic growth to technological innovation. If married with nascent or under-utilised untried technology such as hydrogen, these learnings from China, the Middle East and other increasingly recently ripened markets offer opportunities to pioneer new systems with sustainability at their core.
The Middle East offers several models for special economic zones that may be instructive for a zone-focused sustainability initiative. Jebel Ali Self-ruling Zone in the UAE commenced operations in the 1980s as an integrated merchantry hub. The introduction of special tax, corporate, and planning rules for this zone proved highly constructive in attracting companies in the target sectors, including logistics, petrochemicals and e-commerce to establish operations within the economic self-ruling zone. The zone itself has evolved into a impetus for trade and an eco-system enabling qualifying businesses to thrive, and now contributes increasingly than 21% of Dubai’s GDP.
Elsewhere in Dubai, developments such as Dubai Internet City and Dubai Media City provide remoter models of how developing economic hubs or emerging sector clusters encourages the resource sharing and collaborative enterprise that bolsters growth.
Infrastructure solutions: the spoke
The ‘spoke’ in our hub-and-spoke model is the infrastructure required to transport the energy source from the hub to the demand centres. In the specimen of the hydrogen hub, this could take the form of a pipeline to hydrogen storage facilities at airports and public transportation nodes (for use in public transportation) or uncontrived to significant end user facilities (ammonia production, vessel bunkering locations, blending point and inlet for national gas grid).
The spoke is crucial if hydrogen’s potential role in the energy transition is to be realised. Seen in this context, it should be treated in the same way as ‘critical national infrastructure’ to goody from the streamlined planning and permitting regime workable to national hair-trigger infrastructure. Slantingly this, a bespoke package of fiscal benefits should be offered to vamp investment into this hair-trigger element of hydrogen delivery.
Closing the loop
For hydrogen, raising a hub and spoke model has the potential to unravel the trundling of demand-side uncertainty having a spooky effect on supply-side investment. By opening doors to innovation and investment aligned with well-spoken energy transition objectives, untried (or low carbon) hubs located within economic self-ruling zones and coupled with the designation of spoke infrastructure as national hair-trigger infrastructure, we could see hydrogen fulfil its potential as a renewable energy source hair-trigger to the transition.