Policy

'Domestic heating demand can support new $1.6bn blue hydrogen project — and justify more fossil gas extraction,' says UK regulator

North Sea Transition Authority pitches business case to redevelop Bacton gas terminal as blue H2 project, with ‘overarching goal’ of repurposing existing infrastructure

Bacton Energy Hub.
Bacton Energy Hub.Photo: NetZero East
  • Rachel Parkes
A $1.6bn blue hydrogen project in the UK that would make H2 from fossil gas with carbon capture and storage (CCS) could be underpinned by domestic heating demand in London and southeast England — and justify the production of fossil fuels from the country’s untapped reserves, UK regulators said yesterday.

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The proposed Bacton Energy Hub (BEH) concept, currently being promoted for development by offshore regulator North Sea Transition Authority (NSTA) — known as the Oil & Gas Authority until March this year — envisages a new blue hydrogen production site in north Norfolk on the site of the Shell- and Perenco-owned Bacton gas terminal, which currently processes around a third of all the UK’s gas supplies.

The project would begin producing blue hydrogen by 2030, with the smallest iteration producing around 300MW of H2 at a total cost of £500m ($615m). The biggest version, costing a reported £1.3bn ($1.6bn), would deliver up to 9.5GW of both green hydrogen (made with renewables) and blue hydrogen by 2050. The southern North Sea currently hosts around 6.5GW of offshore wind capacity.
NSTA, which has been working with a number of companies including HyNet developer Progressive Energy, on identifying a business case for the project, says in a new report that demand for hydrogen supplies is not a limiting factor for BEH, with demand “dominated” by domestic heating in London, 138km away, and the densely populated southeast of England.

The regulator, which is also responsible for managing the UK's oil and gas licensing, wants a consortium to form and come forward to develop the project.

Demand could also be driven by blending H2 in the natural gas network, it said.
This is at odds with the position of the UK government, which has previously said that grid blending would be limited. Blending up to 20% H2 in the gas network yields only 6-7% carbon reduction, while putting up costs by 43%, according to a study from the Fraunhofer Institute this year.

The UK government is set to decide on whether it will support hydrogen heating and blending in 2026, several months after the Q3 2025 final investment decision (FID) NTSA says would be necessary to get the project on line by 2030.

One key benefit of the scheme is that it could allow hydrogen production to begin early, the regulator said, but it noted that the overarching goal of the Bacton project would be to “harness the potential of repurposing infrastructure”, such as the Bacton terminal and the gas pipelines networked around it.

Gas distribution companies, desperate to protect returns in the face of decarbonisation of the energy system that could render their assets stranded, have campaigned hard for hydrogen to replace gas as a domestic heating fuel.
But critics point out that using hydrogen in domestic heating will be five times less efficient — and therefore more expensive — than using a heat pump, as well as raising safety concerns about burning H2 within a domestic property.

But perhaps most signficantly, the Bacton Energy Hub would enable the development of as-yet-untapped fossil gas reserves in the area.

“A CCS-enabled hydrogen plant can potentially facilitate the development of previously undeveloped off-spec natural gas, increasing the accessible gas reserves to produce hydrogen in the UK to meet energy security needs,” said the NSTA. “Together with the recently launched 33rd licensing round, this opens a new opportunity for development of this type of resource in a manner aligned with net-zero objectives.”

Specifically, the report identifies 2 trillion cubic feet (around the equivalent gas consumption of a medium-sized economy such as Turkey) of untapped North Sea reserves which could supply the Hub.

A CCS programme could capture a significant portion of carbon emissions from the fossil gas — although a successful programme is yet to be pioneered — but it would not abate methane emissions from upstream extraction or blue hydrogen production. Methane is 84 times more potent as a greenhouse gas than carbon dioxide over 20 years.

NTSA estimates that the smallest iteration of the Bacton Energy Hub project would require equivalent to around 310 million cubic feet a year, while the largest iteration would need to be supplied with extra gas imports from 2040.

Westminster has introduced a Low Carbon Hydrogen Standard which aims to cut methane and carbon emissions from hydrogen production — 2.4kg of CO2e per kilogram of H2 — which some analysts say would require upstream methane emissions intensity of 0.1%. The UK’s current upstream methane emissions intensity is 0.23%.
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Published 16 December 2022, 08:58Updated 16 December 2022, 09:07