Strategic and economic value of hydrogen blending under spotlight in GB

The value of blending up to 20% hydrogen in the gas distribution networks is the focus of a new GB government consultation.

Intended to build on an earlier consultation, the government considers that an appropriate strategic role for blending, if enabled, is to act as a reserve offtaker to support the growth of the hydrogen economy.

However, with the use of hydrogen expected to be most valuable where there are limited alternative routes to decarbonisation, such as for industries for which direct electrification is not an option, it should not ‘crowd out’ this supply.

Moreover, blending should only be a transitional option with its reliance on an extensive natural gas network being available to blend into, which will reduce with progress to net zero.

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Areas where blending may be able to play a role include managing the risk of hydrogen producers being unable to sell sufficient volumes of hydrogen and helping to mitigate the volume risks relating to development of hydrogen transport and storage infrastructure, for example, if a project is delayed.

In addition, and in the initial absence of larger-scale hydrogen transport and storage infrastructure, blending may also have value in enabling electrolytic hydrogen producers to support the wider energy system using excess renewable electricity that would otherwise have been curtailed.

Launching the consultation, Lord Callanan, Minister for Energy Efficiency and Green Finance, said the intent is to capture the full economic potential that comes with using hydrogen as a cleaner, reliable energy source.

“Blending hydrogen into our gas supply – through existing gas infrastructure – would open the doors to an expansion of its use as a fuel, one which could help us cut emissions and stabilise bills for families and businesses.”

The government states in the consultation that blending 20% hydrogen by volume into the gas distribution networks could generate carbon savings of up to 6-7% on consumption of that gas, although the primary strategic role of blending is not to decarbonise the existing gas network.

In the consultation, the preferred commercial support option is to incorporate blending as an eligible offtaker into the ‘Hydrogen Production Business Model’, which is based on a ‘contracts for difference’ style framework.

It also is proposed that both the gas distribution network operators and gas shippers should be able to purchase hydrogen produced for blending, with shippers also able to sell the hydrogen as they currently do for gas.

Other elements of the consultation cover technical delivery models and billing arrangements and includes an economic analysis, which estimates that the blending infrastructure costs are of the order of 2.4-2.9% of the estimated costs of producing, transporting and storing the total hydrogen volumes in the range of the proposed production volumes.

Based on this analysis, blending could offer value for money compared to the counterfactual, where the counterfactual is producing hydrogen but not allowing any volumes to be blended, the government suggests.

The consultation runs until October 27.