Around £13 billion of private investment is needed to deliver the government’s vision of a green hydrogen revolution.
That’s according to new research from LCP, claiming that if this investment is not made, the aim of building 26GW of green hydrogen facilities by 2050 will not happen.
The report does caveat this with the fact government will have to provide further financial support, as the market grows.
It reveals that government support of between £500 million to £1 billion per GW of hydrogen electrolyser will be necessary to ensure the technology can be delivered profitably.
By 2040, the study estimates that 15GW of electrolysers will be deployed and this number will reach 26GW by 2050.
It projects that 105GW of wind and solar energy capacity will be on the UK’s network by 2040 and that renewable generation will outweigh demand in 44% of the hours; leaving 57TW of excess renewable energy that can be used to produce green hydrogen.
It states that if the correct levels of government and private investment are made in the next two decades, by 2040, most projects will become sustainable without support.
Chris Matson, Partner at LCP, said: “Green hydrogen is set to play a crucial role in the net zero transition but as more electrolysers are built and compete with each other, their profitability becomes susceptible to cannibalisation.
“Due to the high levels of excess wind and solar energy we expect to see over the coming decades, it makes sense for the industry and government to invest in large amounts of electrolysis to maximise system benefits and our analysis shows that 26GW by 2050 would be needed.
“This will need government support but will be more cost effective than building and supporting more renewable assets for similar outcomes.
“The government is quite rightly consulting on a future Contracts for Difference model to apply to the hydrogen sector. As our analysis shows, some electrolyser projects could need up to £1bn of support from the government over their lifetime. Investors will be keen to see how this support will play out so that a green hydrogen revolution can become a sustainable reality.”