Take a system wide approach to develop hydrogen's strategic role in the power system

334.  Hydrogen could play an important role in a fully decarbonised power system. Electrolytic production and hydrogen storage can provide flexibility, and flexible power generation can be facilitated by using hydrogen as a fuel - helping to balance a more variable renewables-based electricity grid. There are potentially multiple distinct rolesxiii for hydrogen to play and the overall costs and benefits of some still need to be better understood (for example, of the interaction of hydrogen storage costs and its potential to act as inter-seasonal storage).

335.  The UK's geography is favourable for hydrogen storage due to an abundance of salt caverns, which have the potential to store 9TWh of hydrogen for long duration storage.267 Long duration energy storage could provide between £13 billion and £24 billion in savings to the electricity system between 2030 and 2050, with the largest possible savings deriving from hydrogen storage and power.268 This is explored further in the final section of this Pillar.

336.  Regarding flexible generation, BEIS has commissioned external analysis to evidence the need and case for market intervention to support hydrogen to power applications. Electrolysers can ramp production up and down quickly, and so can be placed in areas of potential constraints to soak up excess generation, avoiding lost power and curtailment costs whilst producing a versatile and low-carbon fuel.xiv

337.  Given these co-benefits of grid flexibility and balancing the future power system, we recommend that the Government takes a system-wide approach to developing hydrogen as a strategic storage asset.

338.  We recommend the Future System Operator (FSO) take forward a role in setting out a system plan for hydrogen, considering the interactions between hydrogen storage and balancing renewables for the decarbonised grid. In doing so, the FSO must consider hydrogen in parallel with the electricity and gas networks.

339.  We also recommend that government, with support from the FSO, takes decisive leadership on naming priority areas for minimum viable pipeline and storage infrastructure, providing strategic direction that shows how we will link up demand and supply. We need early identification of strategic assets that are critical enablers of other infrastructure and therefore require at risk investment.

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xiii  These include: 1) flexible generation (i.e. using hydrogen to fire turbines in power generation plants); 2) using electrolytic production to help balance the intermittency and location of renewables which can result in economic curtailment or network constraints; and 3) using hydrogen storage to provide inter-seasonal long duration energy storage.

xiv  Dynamic Dispatch Model (DDM) reference case analysis suggests economically curtailed electricity could increase from 50-100 TWh in 2035 to 110-220 TWh in 2050. Although dependent on the scale of electrolytic hydrogen production, operating models of individual plants and policy design, some electrolytic projects are likely to also make use of new build renewables (and potentially nuclear) for hydrogen production.