Scotland and North East England offer the best opportunities for successful hydrogen production hubs, while investment in cost-effective hydrogen production technologies – such as electrolysis – would open up export opportunities, according to a new report from Policy Exchange.

Fuelling the Future, by Policy Exchange’s senior energy and environment research fellow Joshua Burke, recommended that:

• Without coordinated leadership on a hydrogen economy from industry and central government (targeted at lowering the cost of sustainable production), the UK will not benefit from the big opportunities to decarbonise.

• As part of the Industrial Strategy Challenge Fund, investment should be focused on R&D to lower the cost of hydrogen production via methods like electrolysis, which has the potential to provide flexible services to help balance intermittent renewable energy.

• New analysis by Policy Exchange suggests that if natural gas used in industry was completely replaced by hydrogen, industrial emissions could drop by 71%. However, more research and investment in infrastructure is needed to reduce the cost of hydrogen production and make this cost-effective for businesses.

• In the short term, long distance freight offers the best opportunities for implementing hydrogen use at scale, and national and local government should work with the private sector to invest in the necessary refuelling network as well as innovation grants for pilot programmes.

• Hydrogen production using electrolysers and ‘spare’ curtailed wind can replace less than 1% of the gas used in domestic heating, while production using fossil fuels is incompatible with domestic decarbonisation targets without carbon capture and storage (CCS). Scotland and the North East of England are the best places in the country for decarbonised hydrogen production hubs using renewable energy and/or CCS so the Government should consider targeting investment there.

A spokesperson for Uniper, which sponsored the report, said: “We’ve been looking at how renewable electricity can be converted to hydrogen and injected into the gas network, to address the challenging question of how to decarbonise heat. Today’s report throws a spotlight on some of the exciting opportunities presented by the emerging hydrogen economy – but like us, it is also clear about the investment and leadership that are crucial if the potential is to be realised.”

More on the hydrogen economy

Cadent plan would see a fifth of gas in northwest replaced with hydrogen

UK should take leadership in using hydrogen, argues IMechE

From New Power Report: energy issues in a switch to hydrogen gas

Hydrogen grid? Think about power – and gas – needs, says energy systems expert

Report suggests converting gas grid to hydrogen network

The gas, electricity, transport balancing act

Does the gas grid have a low-carbon future?

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