Policy & Socio-Economics

During 2020 the Scottish Government in partnership with Highlands and Islands Enterprise and Scottish Enterprise commissioned Arup and E4Tech to carry out a hydrogen assessment to deepen our evidence base in order to inform our policies on hydrogen going forward. The assessment aims to investigate how and where hydrogen may fit within the evolving energy system technically geographically and economically. To assist in this consideration a key part of the Hydrogen Assessment is the development of distinct viable scenarios for hydrogen deployment in Scotland and the economic assessment of those scenarios.<br/>From our assessment it is clear that hydrogen is not just an energy and emissions reduction opportunity; it could also have an important role in generating new economic opportunities in Scotland. The assessment forms an important part of the evidence base that informed the development of the Hydrogen Policy Statement.

The next few decades are expected to be among the most transformative the energy sector has ever seen. Arup envisages a world with a much more diverse range of heating sources and with significantly lower emissions and renewable energy powering transport.<br/>As part of this the establishment of a strong hydrogen economy is a very real opportunity and is within reaching distance. Our report uses the UK as a case study example and explores the challenges and opportunities for hydrogen in the context of the whole energy system.<br/>Read about the progress already being made in using hydrogen for transport and heat. And the need to progress policy and collaboration between government the private sector and other stakeholders to shape future demand change consumer perception and create the strong supply chains needed to allow the hydrogen economy to thrive.

The group concluded that the transition to Net Zero can and will occur and will leave a positive legacy for future generations. They examined the UK as a complex adaptive system and identified recommendations for accelerating progress and reducing the risks of failure. The Group recognised an opportunity for Sensitive Intervention Points (SIPs) coinciding with these recommendations pointing to opportunities to accelerate a transition towards Net Zero by exploiting socio-economic tipping points.

These included:

• Deepening public engagement through investments to support measures to lower ‘thresholds’ to behavioural change such as energy efficiency or dietary alternatives. This can form part of a public engagement strategy for Net Zero that educates the public involves people in decision-making and provides trusted information at key decision points
• Delivering social justice via a clear long-term vision for specific regions coupled with mechanisms that reward the private sector for building industries in otherwise deprived areas starting now
• Government leading on Net Zero by requiring any company meeting with ministers and secretaries of state to have a plan to reach net zero emissions
• Leveraging global dynamics by introducing a border carbon adjustment and consider forming bilateral and multilateral preferential trading arrangements for environmental goods and services
• Penalising emissions by committing in the UK’s NDC to sequester 10% of CO2 emissions generated by fossil fuels and industry by 2030
• Increasing business ambition by identifying businesses that shape industries – celebrate and elevate them
• Accelerating technology via Pathfinder cities that can deliver comprehensive steps towards Net Zero and demonstrate the interactions required across complex systems of low-carbon electricity heat and transport
• Redirecting capital flows by introducing Net zero aligned and transparent accounting and auditing
• Harnessing legal avenues by legislating all regulators to regard the Paris Agreement Sixth Carbon Budget and 2050 Net Zero target in their duties.

The 2014 Review is the fourth review of the FCH JU project portfolio. The reviews began in 2011 following a recommendation arising from the interim evaluation of the FCH JU which identified the need to ensure that the FCH JU project portfolio as a whole fulfilled the objectives of the Multi-Annual Implementation or Work Plan.<br/><br/>An international team of leading experts in the FCH field undertakes each review based on (1) The achievements of the portfolio against the strategic objectives and content of the FCH JU’s MAIP/MAWP and the AIP/AWPs as set out for the transportation and energy innovation pillars and the cross-cutting category; (2) The extent to which the portfolio meets the FCH JU’s remit for promoting the horizontal activities of RCS PNR safety life-cycle and socio-economic analysis education and training and public awareness; (3) The portfolio’s effectiveness in promoting linkages and co-operation between projects and between FCH JU-supported projects and those supported by other European instruments the Member States and internationally. Review panels The 2014 review comprised six panels covering a total of 114 projects. Each panel covered between 10 and 24 projects as shown in Table 1 below. The objective was to assess projects within each panel as a sub-portfolio (within the FCH JU portfolio) and not as individual projects although examples of individual projects representing good practice were highlighted.

Government has reviewed the evidence base on options for achieving long term heat decarbonisation. This report provides an overview of the key issues arising from our review and seeks to:

• highlight the different characteristics of the main alternative sources of low carbon heat and the approaches to achieving transformational change
• set out strategically important issues ‘strategic inferences’ which we have drawn from the evidence available to help focus the development of our long term policy framework
• identify areas that require further exploration to inform the development of a new long term policy framework for heat

The review confirmed we need:

• better understanding of the different options available for decarbonising heating
• a clearer common agenda across industry academia and the public sector to ensure effort and resources are effectively and efficiently applied to long term heat decarbonisation issues

We welcome your views on:

• the strategic inferences identified
• the priority areas requiring further development
• any important omissions
• the parties best placed to deliver in these areas
• opportunities for enhancing co-ordination

We examine the employment implications of a domestic net-zero transition and establishment of clean energy export systems for an historically significant energy exporting country through a case study of Australia. The labour impacts of a multi-decadal transition are simulated across both the domestic and export energy systems considering a wide range of energy technologies resources and activities with assessment according to occupation lifecycle stage education and skill requirements. Across all net-zero scenario pathways by mid-century the total gross employment created for the domestic and export sectors comprises 210–490 thousand jobs and 350–510 thousand jobs respectively. This represents a significant expansion of energy sector employment from the current total of 120 thousand across domestic and export sectors an increase from less than 1 % of the total Australian workforce in 2020 to 3–4 % by 2060. The need to build out energy system infrastructure at large-scale over a number of decades results in construction jobs continuing over that timeframe and a subsequent need for a large ongoing operations and maintenance workforce for new energy system assets. Those employed in domestic energy markets work primarily in utility solar PV onshore wind batteries and electricity transmission and distribution activities while export market jobs are dominated by clean hydrogen production and shipping supply chains. Crucially these export jobs are unevenly distributed across the country in regions of highest quality solar resource. All states and territories experience net job growth across each decade to 2060. However in a few sub-state regions net job losses occur in the short-term.

Low-carbon hydrogen has the potential to play a significant role in tackling climate change and poor air quality. This policy briefing considers how hydrogen could be produced at a useful scale to power vehicles heat homes and supply industrial processes.

Four groups of hydrogen production technologies are examined:

Thermochemical Routes to Hydrogen

These methods typically use heat and fossil fuels. Steam methane reforming is the dominant commercial technology and currently produces hydrogen on a large scale but is not currently low carbon. Carbon capture is therefore essential with this process. Innovative technology developments may also help and research is underway. Alternative thermal methods of creating hydrogen indicate biomass gasification has potential. Other techniques at a low technology readiness level include separation of hydrogen from hydrocarbons using microwaves.

Electrolytic Routes to Hydrogen

Electrolytic hydrogen production also known as electrolysis splits water into hydrogen and oxygen using electricity in an electrolysis cell. Electrolysis produces pure hydrogen which is ideal for low temperature fuel cells for example in electric vehicles. Commercial electrolysers are on the market and have been in use for many years. Further technology developments will enable new generation electrolysers to be commercially competitive when used at scale with fluctuating renewable energy sources.

Biological Routes to Hydrogen

Biological routes usually involve the conversion of biomass to hydrogen and other valuable end products using microbial processes. Methods such as anaerobic digestion are feasible now at a laboratory and small pilot scale. This technology may prove to have additional or greater impact and value as route for the production of high value chemicals within a biorefinery concept.

Solar to Fuels Routes to Hydrogen

A number of experimental techniques have been reported the most developed of which is ‘solar to fuels’ - a suite of technologies that typically split water into hydrogen and oxygen using solar energy. These methods have close parallels with the process of photosynthesis and are often referred to as ‘artificial photosynthesis’ processes. The research is promising though views are divided on its ultimate utility. Competition for space will always limit the scale up of solar to fuels.

The briefing concludes that steam methane reforming and electrolysis are the most likely technologies to be deployed to produce low-carbon hydrogen at volume in the near to mid-term providing that the challenges of high levels of carbon capture (for steam methane reforming) and cost reduction and renewable energy sources (for electrolysis) can be overcome.

Arup have conducted interviews with targeted industry and government stakeholders to gather data and perspectives to support the development of this study. Arup have also utilised private and publicly available data sources building on recent work undertaken by Geoscience Australia and Deloitte and the comprehensive stakeholder engagement process to inform our research. This study considers the supply chain and infrastructure requirements to support the development of export and domestic hubs. The study aims to provide a succinct “Hydrogen Hubs” report for presentation to the hydrogen working group.



The hydrogen supply chain infrastructure required to produce hydrogen for export and domestic hubs was identified along with feedback from the stakeholder engagement process. These infrastructure requirements can be used to determine the factors for assessing export and domestic hub opportunities. Hydrogen production pathways transportation mechanisms and uses were also further evaluated to identify how hubs can be used to balance supply and demand of hydrogen.



A preliminary list of current or anticipated locations has been developed through desktop research Arup project knowledge and the stakeholder consultation process. Over 30 potential hydrogen export locations have been identified in Australia through desktop research and the stakeholder survey and consultation process. In addition to establishing export hubs the creation of domestic demand hubs will be essential to the development of an Australian hydrogen economy. It is for this reason that a list of criteria has been developed for stakeholders to consider in the siting and design of hydrogen hubs. The key considerations explored are based on demand supply chain infrastructure and investment and policy areas.



Based on these considerations a list of criteria were developed to assess the viability of export and domestic hydrogen hubs. Criteria relevant to assessing the suitability of export and domestic hubs include:

• Health and safety provisions;
• Environmental considerations;
• Economic and social considerations;
• Land availability with appropriate zoning and buffer distances & ownership (new terminals storage solar PV industries etc.);•
• Availability of gas pipeline infrastructure;
• Availability of electricity grid connectivity backup energy supply or co-location of renewables;
• Road & rail infrastructure (site access);
• Community and environmental concerns and weather. Social licence consideration;
• Berths (berthing depth ship storage loading facilities existing LNG and/or petroleum infrastructure etc.);
• Port potential (current capacity & occupancy expandability & scalability);
• Availability of or potential for skilled workers (construction & operation);
• Availability of or potential for water (recycled & desalinated);
• Opportunity for co-location with industrial ammonia production and future industrial opportunities;
• Interest (projects priority ports state development areas politics etc.);
• Shipping distance to target market (Japan & South Korea);
• Availability of demand-based infrastructure (i.e. refuelling stations).

A framework that includes the assessment criteria has been developed to aid decision making rather than recommending specific locations that would be most appropriate for a hub. This is because there are so many dynamic factors that go into selecting a location of a hydrogen hub that it is not appropriate to be overly prescriptive or prevent stakeholders from selecting the best location themselves or from the market making decisions based on its own research and knowledge. The developed framework rather provides information and support to enable these decision-making processes.

With the move to a hydrogen-based primary steel production envisioned for the near future in Europe existing regional industrial clusters loose major assets. Such a restructuring of industries may result in a new geographical distribution of the steel industry and also to another quality of vertical integration at sites. Both implications could turn out as drivers or barriers to invest in new technologies and are thus important in respect to vertical integration of sites and to regional policy. This paper describes an approach to model production stock invest for the steel industries in North-Western Europe. Current spatial structures are reproduced with capacity technical and energy efficiency data on the level of single facilities like blast furnaces. With the model developed both investments in specific technologies and at specific production sites can be modelled. The model is used to simulate different possible future scenarios. The case with a clear move to hydrogen-based production is compared to a reference scenario without technological shift. The scenarios show that existing trends like movement of production to the coast may be accelerated by the new technology but that sites in the hinterland can also adapt to a hydrogen economy. Possible effects of business cycles or a circular economy on regional value chains are explored with a Monte-Carlo analysis.

The role of hydrogen in future energy systems is widely acknowledged: from fuel for difficult-to-decarbonize applications to feedstock for chemicals synthesis to energy storage for high penetration of undispatchable renewable electricity. While several literature studies investigate such energy systems the details of how electrolysers and renewable technologies optimally behave and interact remain an open question. With this work we study the interplay between (i) renewable electricity generation through wind and solar (ii) electricity storage in batteries (iii) electricity storage via Power-to-H2 and (iv) hydrogen commodity demand. We do so by designing a cost-optimal zero-emission energy system and use the Netherlands as a case study in a mixed integer linear model with hourly resolution for a time horizon of one year. To account for the significant role of wind we also provide an elaborate approach to model broad portfolios of wind turbines. The results show that if electrolyzers can operate flexibly batteries and power-to-H2-to-power are complementary with the latter using renewable power peaks and the former using lower renewable power outputs. If the operating modes of the power-to-H2-to-power system are limited - artificially or technically - the competitive advantage over batteries decreases. The preference of electrolyzers for power peaks also leads to an increase in renewable energy utilization for increased levels of operation flexibility highlighting the importance of capturing this feature both from a technical and a modeling perspective. When adding a commodity hydrogen demand the amount of hydrogen converted to electricity decreases hence decreasing its role as electricity storage medium.