The energy minister has expressed hope there will be Contracts for Difference (CfD)-style auctions for hydrogen production by 2025.
Giving evidence to the House of Commons Scottish Affairs Committee, which is carrying out an inquiry into hydrogen and CCUS (carbon capture, use and storage), Graham Stuart said the government is focusing on stimulating the hydrogen sector through measures to encourage production.
This would involve using CfDs, which have proved successful in spurring the development of the offshore wind industry over the past decade, or a similar approach, he said: “Hopefully by 2025, we might be able to move to more auction-style approach.
“The most important thing is to get production.
“If we can provide green hydrogen with support at affordable prices, uses will come forward,” Stuart said.
He added that this would be a “more effective” approach than picking sources of demand, such as by subsidising uses, although the government was doing some of that too through initiatives to support hydrogen in fields like industry and transport.
The government has previously signalled support for using CfDs to support hydrogen production.
The minister said while there are a “whole series” of pressures on the public finances, the government is “confident” that the case for investment in hydrogen is “even stronger” now than when the sector’s strategy was published in 2021.
He said there is considerable potential for the UK to become an exporter of green hydrogen, which is produced using electrolysis, to the rest of Europe by exploiting potential surpluses in renewable electricity production as offshore wind is rolled out.
Stuart also defended the higher costs that Scottish generators typically have to pay in order to connect to the power grid on the grounds that this reflects “real costs” but said this approach may be tweaked if it means more renewable generation could come on stream, therefore reducing reliance on more expensive fossil fuels.